India lost $1.5 billion in 2020 by not taxing electronic transmissions: Think tank

Ahead of a key ministerial meeting of the World Trade Organization (WTO) next week, a Geneva-based think tank has pegged India's potential loss of revenue by not taxing electronic transmissions at $1.5 billion in 2020 and $4.9 billion in 2017-20 based on bound rates (the ceiling tariffs committed by respective countries).

As per a research paper by South Centre, an intergovernmental organisation of developing countries, the revenue loss was from imports of items like movies, music and video games. The research paper pitched for customs duties to "regulate conspicuous consumption through imports".

WTO members can't impose customs duties on electronic transmissions since a temporary moratorium was put in place in 1998-something that India has opposed.


India's revenue loss based on applied tariffs (the duties that countries actually levy) was $796 million in 2020 and $2.55 billion in 2017-20, it said.

Developing and least developed countries are losing tariff revenues especially at a time when imports of digitised goods have risen during the pandemic.

"Not only are they losing the fiscal space but are also losing their regulatory space as they are unable to regulate the growing imports of digitizable products, especially of luxury items like movies, music and video games," the paper said.

India's revenue loss is higher than $500 million estimated by an UNCTAD report published in 2019.

"This shows how the revenue loss is gaining pace because of the moratorium," said an official.

As per the South Centre report, during 2017-20, developing countries and LDCs lost $56 billion of tariff revenue.

Noting that this loss is from the imports of just 49 products (at HS six-digit), it said: "With no clarity on the definition of electronic transmissions (ET) and thereby on the scope of the moratorium, the continuation of the WTO moratorium on customs duties on ET can lead to substantive tariff revenue losses for developing and least developed countries in the future".

The loss has been above $100 million for China, Indonesia, Pakistan, Russia, and South Africa while it exceeds $1 billion for India, Mexico, Nigeria and Thailand.