India to Scrap 6% ‘Google Tax’ on Digital Advertising
The Indian government has proposed to eliminate the 6% equalisation levy, commonly known as the “Google tax,” on online advertising services provided by non-resident tech companies. Effective from April 1, 2025, this move comes as part of amendments to the Finance Bill and is intended to reduce tax-related friction with foreign firms and ease the burden on digital advertisers.
The equalisation levy, introduced in 2016, was aimed at taxing payments made by Indian entities to overseas companies for digital advertising services. It was primarily applicable to global tech firms with no physical presence in India but significant business operations through digital platforms.
Relief for Global Tech Giants and Indian Advertisers
Foreign companies like Google and Meta, which dominate India’s digital advertising space, were among the primary entities impacted by this levy. The removal of this tax is expected to ease their compliance burden and improve profitability margins on Indian operations.
Indian advertisers, particularly startups and small businesses, are also likely to benefit from this move. With the 6% levy gone, advertising costs on global platforms could reduce, encouraging broader adoption of digital marketing strategies and accelerating growth across the digital ecosystem.
Move to Address Global Tax Concerns
This development is also seen as a step toward harmonizing India’s digital taxation framework with global standards. The decision aligns with international efforts to reform digital taxation under the OECD framework and comes at a critical time when the U.S. had raised objections to unilateral digital taxes imposed by other nations.
India’s decision is also intended to avert potential retaliatory tariffs from the United States on Indian exports. “India’s move to withdraw the levy is a positive signal to global investors and digital giants, indicating an intent to foster a more stable and predictable tax regime,” noted a senior policy expert.
Outlook for the Digital Economy
With the elimination of the equalisation levy, India aims to create a more favorable environment for digital commerce while reinforcing its commitment to multilateral negotiations on fair taxation of the digital economy. This policy shift is expected to attract further foreign investment, support innovation, and boost the competitiveness of India’s digital landscape.
