NEW DELHI: India is set to abolish the 6% equalisation levy on digital advertising services provided by foreign companies. This move aims at addressing trade concerns, particularly those raised by the United States.
The digital advertising tax, known as the equalization levy, was introduced in 2016. It was meant for foreign companies earning revenue from Indian users. The government expanded it in 2020, covering a wider range of digital services.
This decision, part of the proposed amendments to the Finance Bill 2025, is expected to take effect from April 1, pending parliamentary approval.
The equalisation levy is often referred to as the “Google tax”—was designed to tax payments made by Indian businesses to foreign entities for digital advertising services.
Major U.S. tech companies such as Google, Meta, and Amazon were significantly impacted by this tax. The United States had criticized the levy as discriminatory, arguing that it unfairly targeted foreign firms while exempting domestic companies.
The removal of this tax follows India’s earlier decision to abolish a 2% levy on non-resident e-commerce firms providing online services.
These steps are seen as efforts to ease trade tensions and advance negotiations for a broader trade agreement between India and the U.S., aiming for $500 billion in two-way trade by 2030.
Additionally, it is expected to make digital advertising more affordable for Indian businesses, particularly benefiting startups and small enterprises by enabling better returns on investment for their digital campaigns.
While this move is anticipated to improve trade relations with the United States, it remains to be seen how it will influence ongoing negotiations and whether it will lead to reciprocal measures from the U.S.
A delegation led by Brendan Lynch, the Assistant U.S. Trade Representative for South and Central Asia, is currently in India for discussions with officials.
