In a major policy shift, the Indian government has proposed to abolish the 6% equalisation levy (EL) on online advertisements, signalling a move towards easing tax burdens on businesses. This decision, part of the 35 amendments to the Finance Bill 2025, is considered a strategic step amid ongoing trade discussions with the US.
Since its introduction in 2016, the equalisation levy has applied to annual payments exceeding ₹1 lakh to non-resident service providers for digital ads. Now, with the proposed rollback set to take effect from April 1, 2025, companies operating in India’s digital economy could see significant cost relief.
A Move Rooted in Global Trade Dynamics
This isn’t the first time India has adjusted its digital tax policies in response to international pressures. Last year, the government scrapped a 2% levy on digital services for foreign tech firms like Google, Meta, and Amazon following diplomatic tensions with Washington. However, the 6% levy on online ads remained in place—until now.
The US has long contested digital service taxes, arguing that they unfairly target American tech giants. In 2020, a year-long investigation by the US found that such taxes—adopted by countries including Austria, Italy, Spain, Turkey, and the UK—violated international taxation principles and disproportionately burdened American firms.
What’s Next?
The amendments to the Finance Bill, introduced in Lok Sabha by Minister of State for Finance Pankaj Chaudhary, are expected to streamline India’s digital tax framework and encourage global investment. This move also aligns with the country’s vision of creating a more competitive and business-friendly digital ecosystem.
While businesses and tech firms may welcome the relief, the real question is—will this mark the beginning of a more collaborative global digital tax landscape? Only time will tell.
