The recent policies of the Trump administration have increased India’s difficulties. After imposing heavy tariffs on Indian goods, the US has now targeted its service exports. A new bill, “Halting International Relocation of Employment Act”, has been introduced in the US Senate. That is, the US is preparing to impose 25 percent tariffs on outsourcing companies. If this proposal becomes a law, the Indian IT industry may get a major setback. Industry experts say that this tax may increase the burden of about 60 percent on American companies.
Shock for Indian IT industry
If this proposed law related to outsourcing is applicable from next year, ie January 1, 2026, American companies will have to reconsider their global outsourcing models. If they do not do so, they will have to pay the state and local taxes as well as excise duty, which will increase the cost manifold.
American Republican Senator Berney Moreno (Ohio) has introduced the “Halting International Relocation of Employment (HIRE) Act”. If it is passed by the US Congress, American companies will have to pay up to 25 percent tax on the appointment of foreign employees. Any revenue obtained from the proposed law will be spent on the development programs of the US middle class.
What is the definition of outsourcing?
In this proposed law, outsourcing is considered to be any service fee, premium, royalty or other payment paid by an American company or taxpayer to a foreign institution, directly or indirectly benefited American customers.
Experts believe that this tax is a type of excise duty, not corporate income tax. This will only affect the services that American customers will use directly. This situation can be quite challenging for Indian IT companies as America is their largest market.
