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US 9/11 treatment tax upsets India

New Delhi, Jan. 2: New Delhi may take Washington to the World Trade Organisation’s dispute panel over its move to fund a free-treatment scheme for 9/11 victims through legislation that will cost Indian IT companies millions of dollars, officials said.

Washington plans to raise the money in two ways. One, by imposing a two per cent levy on goods and services it imports from certain developing countries that include India. Two, by extending a fee hike for certain categories of the H1B and L1 visas that are extensively used by Indian professionals working in America.

These new laws will mainly hurt India’s IT companies, which earn about 60 per cent of the country’s $50 billion revenues from exports to America. The visa fee hike alone is expected to cost Indian IT companies operating in the US an extra $200 million a year.

“We plan to seek consultation with Washington at the WTO (an international body dealing with the rules of trade between nations) to discuss the legislation,” an Indian commerce ministry official said. “We would not hesitate to take the matter to the dispute settlement panel of the trade body if the issue does not get resolved.”

Commerce minister Anand Sharma has said the US move is “to my mind, a retrograde step” for greater trade engagement. He said that during President Barack Obama’s recent India visit, the two sides had agreed to reduce trade barriers and abjure protectionist measures to ease movement of professionals and investors.

The US legislation is aimed at funding free treatment of workers suffering from illnesses contracted while clearing the World Trade Center debris after the September 11, 2001, attacks.

The James Zadroga 9/11 Health and Compensation Act seeks to create a $4.3-billion fund for these workers, who number about 60,000. The act is named after a New York police officer who died in 2006, aged 34, from a respiratory disease. It is yet to be signed into operation by Obama.

In August, Washington had hiked the H1B and L1 visa fees till 2014 under the US Border Security provisions; the Zadroga act extends the hikes by one more year.

The two per cent import excise affects countries outside the purview of the WTO’s Agreement on Government Procurement. India is among these countries, which include China, the Philippines, Malaysia and nations in Africa, West Asia and Latin America.

The act’s provisions are being closely studied in Delhi, the commerce ministry source said. “Consultations are being made with the law ministry to make our case strong,” he said. “We plan to talk to other countries affected by the legislation so we can have a convergence of views and better coordination for a better result in dealing with Washington.”

Som Mittal, president of the National Association of Software and Services Companies, said US lawmakers seem to have developed a practice of unfairly taxing foreign companies to pay for domestic issues.

“The bill is a violation in spirit of the joint communiqué signed by President Obama and Prime Minister Manmohan Singh,” he said.

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