India is set to remove the 6% equalisation levy, commonly referred to as the ‘Google tax’, on online advertising services provided by foreign tech companies like Google and Meta from April 1. This decision is part of amendments to the Finance Bill, 2025, aimed at improving trade relations between India and the US, reported Reuters.
The levy, introduced in 2016, taxed payments made by Indian businesses to foreign companies for digital advertising services.
The elimination of the tax comes as part of India’s efforts to mitigate trade tensions with the US, which had previously criticised the levy and threatened retaliatory tariffs on Indian exports such as shrimp and basmati rice. The removal is expected to benefit tech giants, reducing advertising costs and enhancing their profit margins.
“Removal of the equalisation levy is a smart move by the government, as collections weren’t very high, and it was a concern for the US administration,” remarked Sudhir Kapadia, senior advisor at EY, to Reuters. The gesture is seen as an attempt to prevent further trade disputes and maintain a stable trading environment.
Lowering advertising costs on platforms such as Google and Meta is anticipated to encourage more digital ad spending by Indian businesses, subsequently attracting more advertisers to these platforms and boosting their revenues. Additionally, this move is likely to improve profitability for these tech companies.
The decision is also expected to drive more foreign investment into India’s digital sector. By making digital advertising cheaper, the government hopes to stimulate the digital economy, providing opportunities for growth and innovation.
Alongside the levy removal, the government plans to revoke certain tax exemptions previously available to foreign tech companies. While the levy will be scrapped, these companies may still be taxed under other provisions, maintaining a balanced tax framework.
The Finance Bill also includes changes to offshore fund management rules, aimed at easing the relocation of such funds to India.
