WTO moratorium lapse opens door for digital duties, experts warn of daunting task

The expiry of the World Trade Organisation’s (WTO) e-commerce moratorium on March 31 has given India theoretical policy space to impose customs duties on digital imports like software downloads, streaming content, e-books, cloud services and video games. However, tax experts warn that actually imposing such duties would face formidable legal, administrative and enforcement challenges, making effective implementation highly difficult.

Experts highlighted difficulties in valuation of intangibles, classification, and enforcement in a borderless digital environment with no physical checkpoints. The Revenue potential is viewed as modest.

What do consultants say?

Manoj Mishra, Partner and Tax Controversy Management Leader, Grant Tornton Bharat said unlike physical goods, digital supplies do not have a clear ‘import event’, which makes taxation under customs law difficult.

“While estimates suggest India may be losing around USD 500 million annually due to the moratorium, the actual gains from imposing such duties may be limited in the near term. This is because of challenges in valuation, lack of physical checkpoints, and uncertainty in classification,” Mishra said.

Brijesh Kothary, Partner at Khaitan & Co, said while potential revenue gains may not be a significant number, the larger significance lies in policy flexibility and negotiating leverage in shaping future global digital trade rules.

Commerce and Industry Minister Piyush Goyal recently signalled India’s preference for a “slightly longer” extension of the moratorium beyond the customary two years. He stated that this would provide businesses greater certainty and predictability to plan their activities over a longer period. Goyal noted that the matter is still under discussion among WTO members and is expected to be finalised in Geneva in the next month or two.

This is in contrast to earlier stand taken by India that the moratorium that has been in place since 1998 should not be extended. This stand was repeated at the General Council meeting of the WTO in December 2025. 

Retaliatory risks of importing duties

The experts also highlighted retaliatory risk of imposing duties. Kothary said that even after the moratorium’s lapse, India remains bound by WTO principles such as Most-Favoured-Nation treatment, meaning duties cannot discriminate between trading partners. “There is also a real risk of retaliatory measures, particularly from countries like the US, which may challenge such duties or respond with counter-measures, making this more of a policy decision than a tax one,” he said.

Bipin Sapra, Partner and Indirect Tax Policy Leader, EY India saidIndia already imposes a Goods and Services Tax on Online Information and Database Access or Retrieval (OIDAR) services which cover the broad spectrum of the digital transactions, hence there is already a level of regulatory control which will allow ease of levy of customs duty for these supplies.

“The current levy of OIDAR already suffers from enforcement difficulties given that there is no regulatory control on the actual transfer. This will be compounded further in case of Business to consumer supplies where consumers may have to bear the liability of customs duty, being the importers of these supplies, unlike in OIDAR supplies where the overseas service provider has to register in India and pay the tax,” Sapra said.

On the compliance front, experts said the government may first need to clearly define “electronic transmissions”, establish a valuation mechanism, and determine whether such supplies qualify as goods or services. Ikesh Nagpal, Lead-Indirect Tax, AKM Global, said if India chooses to exercise this policy space, it would first need to put in place a comprehensive legal and administrative framework.

“This would include amending the Customs Tariff Act, defining digital imports, framing valuation rules, aligning with service classifications, and creating reporting and compliance mechanisms for importing entities. Implementation may be realistically taking a year or so. A phased approach with a transition window would therefore be more practical,” he said.