India is set to abolish the 6% equalisation levy on digital advertising services—commonly known as the “Google tax”—starting April 1, 2025. The move aims to defuse trade tensions with US, particularly ahead of expected retaliatory tariffs on Indian exports set to take effect from April 2.
The measure was included in a set of 59 amendments to the Finance Bill, introduced in Parliament on March 24 by Finance Minister Nirmala Sitharaman. This decision marks a policy reversal just days before President Donald Trump is expected to impose trade measures targeting countries that levy digital taxes on US technology giants.
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What Was the Equalisation Levy?
Introduced in 2016 and later expanded in 2020, the equalisation levy was designed to tax large foreign digital companies, including Google and Meta, which generate significant revenue from Indian users without maintaining a physical presence in the country.
While the tax was intended to ensure a fair taxation system, it has been a longstanding source of friction with Washington, which viewed it as discriminatory against American firms.
According to Economic Times, India collected Rs 3,343 crore from the equalisation levy in the current financial year, up to March 15, 2025.
Diplomatic and Economic Impact
The rollback of the equalisation levy is being seen as a strategic move to ease diplomatic tensions, especially with Donald Trump preparing to announce new tariffs on April 2. By scrapping the tax, India aims to avoid retaliatory measures that could hurt its exports to the US.
While some may interpret this as a policy retreat, global investors and tech firms are likely to welcome the decision. Additionally, Monday’s amendment removes certain tax exemptions previously granted to digital firms in place of the equalisation levy, signaling a clean break from the previous regime.
Beyond the Google tax rollback, the Finance Bill also includes amendments aimed at encouraging offshore funds to relocate to India and clarifying income disclosures uncovered during search and seizure operations.
With this latest move, India appears to be prioritizing trade stability and foreign investment while addressing concerns over digital taxation.
