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The India-Australia Economic Cooperation and Trade Agreement (IndAus ECTA) inked on Saturday found a resolution to the double taxation issue for Indian information technology (IT) firms, allows duty-free access to Indian wines, and a Work and Holiday arrangement that experts believe will find many takers in India.

Also, a negotiation sub-committee between India and Australia will start talks within 75 days to transform the interim pact into a full-fledged comprehensive economic cooperation agreement (CECA), according to the agreement’s text.

In a major relief for Indian IT firms such as Infosys Ltd, Wipro Ltd, Tata Consultancy Services Ltd, and HCL Technologies Ltd, Australia has committed to resolving the long-pending double taxation issue that was affecting Indian tech firms operating in the country through amendments in its domestic law over the next few months. The resolution of this issue will happen in line with the implementation of the bilateral economic cooperation and bilateral free trade pact between the two nations and is expected to help Indian IT companies expand operations in Australia.

The India-Australia deal is expected to be implemented in four months. According to industry estimates, Indian IT firms lost more than $1 billion in taxes due to existing provisions in the Australia-India double taxation avoidance agreement (DTAA) causing double taxation issues for these companies. Most IT firms take up projects where they do some portion of work on-site, and some from India. However, Australian courts have ruled that even the work done from India can be considered as royalties and be taxed as per local Australian laws. The same income is also taxed in India.

“Nasscom has been advocating for this change for a few years and is delighted to see the roadmap for resolution under the ambit of the Australia – India Economic Cooperation and Trade Agreement," said Gagan Sabharwal, senior director at industry body Nasscom. “We will continue to work with both governments and are confident that amendments in the Australian domestic law will be made soon in the upcoming Parliament session to seal this intent," added Sabharwal.

He said recognising talent mobility with four-year temporary work permits, spouses and dependent visas would enable enterprises in both countries to leverage digital talent skills, build digital capabilities at scale and collaborate through innovative startups.

Queries emailed to Infosys, HCL, TCS, and Wipro remained unanswered till press time.

While India has agreed to reduce the duty on Australian wines and, in turn, got duty free access on Indian wines, market access for Indian whiskeys and spirits may need to wait longer. The two sides have decided to set up a working group within the next six months of the agreement coming into force to consider market access, maturation rules for whiskey and other issues related to the Indian alcoholic beverage industry. The issue pertains to maturation rules, where Australian laws allow whiskeys and spirits only over two years of maturation. However, the Indian side has been pressing for the removal of this condition, arguing that Indian whiskeys mature faster due to the warmer climate and a two-year maturation rule results in a 10% volume loss due to evaporation.

“This historic FTA facilitates better market access for quality Australian wines into India and opens up the Indian wine industry to great opportunities in cross border investment, expertise transfer, collaboration and partnerships… For liquor, where India is a major producer, some regulatory hurdles remain against the export of Indian products to Australia. However, the FTA outlines a roadmap with time frames to resolve such issues, and once it’s done, Indian industry will be a big gainer," said Vinod Giri, director general, Confederation of Indian Alcoholic Beverage Companies.

Tariffs on Australian wines with a minimum import price of $5 per bottle will be reduced from 150% to 100% on the deal’s implementation and subsequently to 50% over 10 years. Also, duty on bottles with a minimum import price of $15 will be reduced from 150% to 75%, and subsequently to 25% over 10 years.

The two sides have also agreed to set up a joint working group on wine for the exchange of information and cooperation on production and trade-related matters on wine.

Australia has also agreed to implement a Work and Holiday arrangement with India within two years of the pact coming into effect, granting 1,000 visas, which will allow Indians who are over 18 years and less than 31 to stay in Australia for a year. It will be a multiple entry visa, allowing them to enter and re-enter Australia multiple times, take up paid or unpaid employment for up to six months and undertake study or training for up to four months.

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