NEW DELHI: Commerce and industry minister Anand Sharma is likely to press for a Totalisation Agreement with the United States during his four-day visit to the country beginning Wednesday, a move aimed at protecting the interests of Indian professionals who contribute more than $1 billion every year to the US social security system through federal taxes without availing any benefits in return.
A Totalisation Agreement aims to avoiddouble taxation of income with respect to social security taxes by determining whether a foreigner is subject to the social security tax of the country he is living in. Although the US has entered into Totalisation Agreements with 24 nations, an agreement with India has been on hold for many years. India had signed a similar agreement with Canada last November .
Senior Indian officials said in his meeting with the US trade representative Mike Froman, Sharma is likely to ask the US to re-start negotiations on the Totalisation deal.
"Both India and the US have entered into similar agreements with countries like Denmark, Belgium, Germany and Canada, and there is no reason why such an agreement cannot be concluded between India and the US," an official said.
Work visas are issued for a maximum of six years, however, eligibility for social security benefits in the US requires residence of over 10 years.Sharma is also expected to meet industry and business leaders during his US visit, including Scott Price, president and CEO of Walmart Asia and Ted Cohen, head of global public policy at Ebay. The minister is likely to discuss issues related to FDI in India's retail and e-commerce by US companies.
With India's exports declining 1.76% in 2012-13, Sharma is likely to ask the US to renew the generalized system of preferences (GSP), which expires on July 31. Sharma will also press US to continue with GSP benefits to India amid rising chorus in the US that India should no longer get these benefits.
GSP seeks to promote economic growth in the developing world by providing preferential duty-free entry for up to 5,000 products. Among developing countries, India was the top GSP-beneficiary in 2011 with $3.7 billion in imports entering the US duty free.
Sharma is likely to highlight its significance for the labour intensive MSMEs mostly employing women. Exports from US saw a 4% growth in the last fiscal, to stand at $36 billion, with a share of 12% in total exports. "Pending renewal of the GSP programme, all products shall be exposed to the Full Rate of Import Custom Duties, against a 5-6.5% advantage exporters are getting. The increased cost of imports will make products of Indian origin expensive and highly uncompetitive in the US market and this will be a major setback to all the Indian exporters," said Sanjay Budhia, chairman of the CII's national committee on exports.
India is also likely to put forward its request for LNG sourcing from the US. The US Department of Energy is making an assessment of LNG exports to non-FTA countries, and it will then decide on pending applications for LNG export authorizations. "Positive decision on export to India is a win-win situation for both sides. While India stands to benefit from a new source of energy at comparatively low cost, the US economy will benefit from large-scale investment from Indian companies," an India official said.