By David Lawder

WASHINGTON, (Reuters) – The U.S. Trade Representative’s office announced Wednesday that it will terminate the trade retaliation suit against India. This was after Washington and New Delhi reached a transitional global tax agreement. It will remove India’s tax on digital services.

USTR stated that the U.S. Treasury’s agreement with India’s Finance Ministry follows the same terms as the agreements with Austria, Britain and France. However, the implementation deadline is slightly later.

Following an Oct. agreement between 136 countries to withhold their digital services tax, the pact is part of a comprehensive global tax deal. The global tax deal was agreed to adopt a minimum global corporate tax of 15% as well as some tax rights for large profit-making companies that are allowed to sell to markets countries.

The governments agreed not to impose digital services taxes until the OECD Tax Deal is implemented by the End of 2023. But arrangements were needed with seven other countries, which had digital taxes largely targeting U.S. technology companies like Amazon.com and Facebook.

Washington and New Delhi have reached a deal that brings together all seven countries in a transition agreement. It was made after Katherine Tai, U.S. Trade Representative, visited India to increase trade cooperation for agricultural goods.

The countries are allowed to continue collecting digital service taxes under the terms of the withdrawal agreement until the new system is in place. For Turkey and European countries, however, all taxes that are collected beyond what the companies will have to pay in accordance with the new rules would be applied against their future tax liability.

USTR indicated that the India credit start date has been pushed back to April 1, 20,22. There is a three month extension available beyond 2023 if the OECD Tax Deal is not completed by then.