Finance Minister Nirmala Sitharaman on Wednesday, 16 September 2026, called for a careful, evidence-based approach to taxing the digital economy, warning that any policy decisions must account for their impact on India, other jurisdictions, and the country's future investment climate. She was speaking at an event organised by the International Tax Research and Analysis Foundation (ITRAF) in Bengaluru.

Why Digital Taxation Is Uniquely Complex

Sitharaman underscored that digital economy taxation raises fundamental questions about where tax liability falls and on whom — particularly in areas such as cloud services, digital products, and cross-border consumption of digital services. 'The complexity has to be coolly studied, the implications for India and implications for outside, and above all, the implication that it can have in terms of further investments coming into India, must be coolly studied as well,' she said.

The minister also flagged emerging issues that tax policy will increasingly need to address, including significant economic presence, virtual permanent establishments, taxation of artificial intelligence and robotics, the gig economy, global mobility, virtual digital assets, global capability centres, and the treatment of goods and services in digital transactions.

India's Role in Global Two-Pillar Tax Talks

Sitharaman acknowledged India's active role in the ongoing global two-pillar tax negotiations, noting that the country had withdrawn two taxes on digital companies during the process — a step taken, she explained, to build confidence in the emerging international agreement. She cautioned against reducing the debate to a simple question of whether India was losing revenue, framing digital taxation instead as part of a broader, ongoing global negotiation.

GST Clarity and the Goods vs Services Debate

The Finance Minister said the government was open to establishing an institutional mechanism that would provide greater clarity on whether digital transactions should be classified as goods or services under both GST and income tax laws. She invited industry to submit proposals and suggestions on the matter, acknowledging that this distinction has grown increasingly complex as businesses operate across borders.

Sitharaman also confirmed that the next GST Council meeting, scheduled for 7 October, would take up process reforms under GST 2.0, including issues related to e-invoicing. She noted that the previous Council meeting had focused on rate rationalisation, with process reforms deferred to the upcoming session. Industry was additionally invited to flag specific anomalies in the GST framework that may not yet have been addressed.

FDI, GIFT City, and the Investment Climate

Turning to investment, Sitharaman highlighted that the government had progressively widened foreign direct investment (FDI) limits since 2014, with most inflows now arriving through the automatic route, barring sectors with security considerations. She pointed to global supply-chain diversification under the 'China plus one' strategy as a tailwind for India, and cited GIFT City as a key conduit for channelling offshore capital into sectors such as maintenance, repair and overhaul, shipbuilding, and fintech.

A Call for Substantive Policy Engagement

Sitharaman urged tax professionals, industry bodies, and researchers to move beyond routine requests for lower rates, exemptions, and concessions, and instead contribute to evidence-based tax policy. She called on industry associations to be willing to flag provisions that should be removed — even when those provisions currently benefit them. 'Consultation must mean more than giving everyone an opportunity to place a representation on record. It should be a genuine exercise of evidence, experience, and ideas,' she said. The remarks signal a shift in the government's expectations from the private sector ahead of what could be a significant round of digital tax reform.