As the Centre moves forward with securing parliamentary approval for the Union Budget 2025, the government has introduced a fresh amendment to the Finance Bill 2025. On Monday (March 24), it proposed removing the 6% equalisation levy on online services under direct taxes.”
The 6% levy, popularly known as the “Google Tax,” was primarily imposed on online advertising services. Once abolished, this move is expected to ease the tax burden on Indian consumers of digital advertising.
If the proposal is approved by Parliament, the levy will no longer apply starting April 1, 2025.
The removal of the levy is expected to benefit companies selling online advertising space, particularly major US-based tech giants like Google and Meta.
The Equalisation Levy was first introduced in 2016 to ensure foreign digital service providers paid their fair share of taxes on revenue generated from Indian users.
Over the years, the US has strongly opposed the tax, demanding a complete rollback. Despite this, India expanded the levy in 2020, adding a 2% tax on e-commerce transactions involving foreign companies.
The government argued that these levies helped regulate cross-border digital transactions and ensured fair taxation. However, in 2021, a report by the US Trade Representative (USTR) criticised the expanded levy as discriminatory, stating that it disproportionately affected US-based firms.
The 2% tax covered a broad range of services, including software-as-a-service (SaaS), cloud services, financial services, education services, and digital sales.
Recognising these concerns, India began rolling back parts of the levy. In the Union Budget 2024, Finance Minister Nirmala Sitharaman proposed removing the 2% equalisation levy on e-commerce services, effective August 1, 2024.
However, the 6% levy on online advertising remained in place.
With the latest amendment to the Finance Bill 2025, experts believe India is furthering its commitment to gradually reducing digital taxation.
The reaction from global tech giants like Google and Meta will be closely watched in the coming weeks.
Source: https://www.cnbctv18.com/
