Government moves to abolish 6% equalisation levy on online ads

India plans to eliminate a 6% tax on digital advertising services affecting major U.S. tech firms, including Google, Meta, and Amazon, as part of amendments to the Finance Bill 2025. The move, expected to take effect on April 1 pending parliamentary approval, aims to address U.S. trade concerns and support ongoing bilateral negotiations, according to media reports.

Introduced in 2016, the tax was designed to ensure foreign digital companies paid taxes on revenue generated in India. However, the U.S. Trade Representative criticised it as discriminatory. The repeal follows Prime Minister Narendra Modi’s recent visit to Washington, where both nations committed to expanding two-way trade to $500 billion by 2030. A U.S. delegation led by Assistant Trade Representative Brendan Lynch is currently in India for talks.

Tax experts suggest the repeal is an effort to ease tensions and avert potential U.S. tariffs. Former President Donald Trump had previously warned of reciprocal action against countries imposing digital service taxes. Last year, India also scrapped a 2% levy on non-resident e-commerce firms following similar U.S. concerns.

The repeal, pending legislative approval, is expected to ease compliance for foreign tech firms and potentially lower advertising costs for Indian businesses. It is part of broader Finance Bill amendments, including offshore investment reforms and tax assessment changes.

The U.S. has yet to issue an official response to India’s proposed changes.