Indian IT firms to start saving on tax payments by September as Australia secures Dtaa amendment: Sources
Australia has assured India that it will secure the approval of its Parliament for an amendment to the Double Taxation Avoidance Agreement (DTAA) and the Economic and Trade Cooperation Agreement (ECTA) of September here.
An amendment to the DTAA will benefit India’s information technology (IT) sector as taxation on offshore income of Indian companies providing technical assistance in Australia will cease.
India has called for a quick change to the DTAA regulations, raising concerns that its IT companies are paying more than the tax required in Australia.
In 2018, an Australian court imposed taxation on payments made to Indian companies by their Australian customers. NASSCOM had pegged losses at $1 billion for the Indian IT industry due to double taxation in Australia.
Indian Trade and Industry Minister Piyush Goyal and Australian Trade Minister Dan Tehan signed ECTA in April to expand cooperation in trade, labor and travel between the nations.
India is set to benefit from the preferential market access provided by Australia on 100% of its tariff lines, which include all labor intensive sectors of export interest to India , such as gemstones and jewelry, textiles, leather, footwear, furniture, food, agriculture products, engineering products, medical devices and automobiles.
India will also provide preferential access to Australia on over 70% of its tariff lines, including lines of export interest to Australia, primarily raw materials and intermediates such as coal, ores and wines, etc.
Negotiations for the India-Australia ECTA were officially re-launched on September 30, 2021 and concluded on an expedited basis at the end of March.
Australia is India’s 17th largest trading partner and India is Australia’s 9th largest trading partner. Bilateral trade in goods and services between India and Australia was valued at $27.5 billion in 2021.
India’s merchandise exports to Australia grew by 135% between 2019 and 2021. India’s exports comprise a large basket of mostly finished goods and amounted to $6.9 billion in 2021 India’s merchandise imports from Australia amounted to $15.1 billion in 2021, largely comprising raw materials, minerals and intermediate goods.
First post: STI