Digital Services Tax in the Platform-Based Economy: Navigating Business Adaptation and Global Trade Challenges

Abstract

The paper aims to examine the evolution and implementation of the taxation regime for digital transactions within the E-commerce platform. The study also analyzes the challenges & repercussions that arose during the implementation of DST, including compliance burdens,  double taxation, and trade conflicts, particularly with the United States. Amid these challenges, international efforts to establish a coordinated approach for digital taxation have gained prominence.  India's abolition of its Equalisation Levy (EL) under its unilateral measure in April 2025 signals its commitment to the OECD  two-pillar framework for the long-term sustainable and equitable global taxation system. The study investigates the broader implications of the removal of digital tax reforms on the e-commerce business dynamics. The study emphasizes that to achieve a “sustainable digital tax system”, it requires a balanced, cooperative framework that reduces trade conflicts and promotes tax fairness.  Policymakers must ensure that this transition protects the interests of domestic enterprises while securing India’s share of global digital revenues. It also recommends international policy coordination, simplified compliance mechanisms, and AI-driven tax administration to enhance efficiency and fairness in digital taxation.