India has asked Australia to expedite amendments to regulations pertaining to the Double Taxation Avoidance Agreement (DTAA), in accordance with an understanding reached between the two sides in April, as Indian information technology (IT) companies that operate in that country continue to be forced to pay more taxes than they should.
Minister of state for commerce and industry Anupriya Patel has told visiting deputy premier of Western Australia province Roger Cook that the amendment should be done at the earliest to stop taxing the offshore income of Indian firms providing technical support there, the commerce ministry said on Thursday.
Both the sides also acknowledged the need for an early ratification of the interim trade deal, or the India Australia Economic Co-operation and Trade Agreement (ECTA), which was signed in April. Canberra’s decision to tweak its domestic law to stop such taxation is a part of the India-Australia ECTA.
Once implemented, the move will correct a costly anomaly in the 1991 DTAA between the two countries and enable IT and ITeS (IT-enabled Services) players to substantially scale up their operations in Australia. The anomaly is expected to have cost Indian IT companies about $1.3 billion since 2012, according to an industry estimate.
Using the provisions of the India-Australia DTAA, Canberra has been taxing income generated from offshore IT services rendered from India as royalty, even when the same income is being taxed in India as well.