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Unlike past, there is subtle silence over the fate of moratorium, which is set to expire in March 2026, unless extended in upcoming MC 14 (14th Ministerial Conference due from 26 to 29 March in Cameroon). Upcoming budget may reveal whether India is moving forward in direction of levying duty on digital goods and adds a Chapter 99 to the existing customs tariff – dedicated to levy of duties on digital goods.
With advent of internet and e-commerce in the global economy, WTO members at the second Ministerial Conference in May 1998 adopted a declaration on Global Electronic Commerce. Ministers (of member countries) also agreed to continue their practice of not imposing customs duties on electronic transmissions. Since then, this is known as a Moratorium on Electronic Transmissions.
Moratorium ensured that digital goods like music, software, e-books, video games, movies, etc. (which were on rise in 1998 and following years) have easy and free access to all WTO members and its consumers.
In recent years, India, along with other members including South Africa and Indonesia, has consistently opposed indefinite extensions, citing annual revenue losses as well as reduced protection for domestic industry.
At MC13 (13th WTO Ministerial Conference), India reaffirmed its demand to recall the moratorium, mentioning that it restricts the flexibility of developing economies. It has been repeatedly highlighted that moratorium bends in favour of developed members viz., the US, the EU and China.
India became a signatory to Information technology Agreement in 1997, committing to eliminate duties on Information Technology (IT) goods to ensure availability of wide range of technologically advanced goods to Indian consumers. However, over the years this has had an adverse impact on India’s domestic industry. Not only did India become solely dependent on imported IT hardware, but there was also very little room for growth of domestic industry given tough competition from large conglomerates of the US and the EU, followed by China thereafter.
E-commerce moratorium preventing duties on digital goods has had a similar impact. While there is little data available on the revenue loss e-commerce moratorium has contributed to, the exploding digital trade suggests significant duty revenue loss, which otherwise could have been used for various developmental purposes. Also, moratorium takes away the sovereign right to navigate duties to protect infant industries and consequently provide room for domestic industry growth.
While Moratorium bars India from levy of duty on digital transmission of goods – given India’s longstanding position against the moratorium, India may choose to set up the framework for levy of duty on digital goods. In the run up to this, Finance Minister in the upcoming budget may propose to introduce a new Chapter 99, diverging from usual WTO HSN practice, to cover digital goods, keeping the duty rates zero for now.
New Chapter 99 will provide the necessary classification of digital goods, which otherwise is not available as of today. Additionally, it may also serve as a guidance note for the industry for distinction between digital goods and services, and what all may get covered under the customs duty ambit as and when the moratorium falls off.
As of now, there is a fair bit of ambiguity as to what qualifies as digital goods and what will be regarded as digital services. For instance, streaming of movie over a platform – whether it qualifies as import of goods or services? Government would need to cull out clear guidelines to distinguish digital goods from services and clarify that only goods attract customs duty. At the same time, dual GST levy needs to be avoided – one in the form of import of goods and other in the form of OIDAR GST levy as import of services, as may happen in case of, say, import of e-books.
Unlike physical imports, digital goods do not pass through ports or require shipping documentation. Hence, it is argued that even if India moves ahead with levying customs duties on digital goods, tracking intangible imports is not feasible. OIDAR regulations under GST are an example on how such transactions can be monitored and taxed in practice. While there can always be misses and evasions requiring interventions, a similar system (like OIDAR) based on self-assessment by supplier of goods can run well. India may lay down simple registration norms for overseas suppliers with duty payments due on a periodic basis (unlike for each transaction in case of physical imports).
With introduction of new chapter 99, India can use this as a bargaining tool in broader trade negotiations securing concessions on market access, technology transfer, and digital sovereignty which will help in shaping India’s digital market. Also, it will be a first step towards India’s longstanding demand for levying customs duties on digital transmissions.
Ravi Jain, Director, Grant Thorton Bharat, has also contributed to this article.
This article first appeared in the Times of India on 30 January 2026.
