The Indian government plans to eliminate the 6% equalisation levy known as the Google Tax which affects digital advertising services from foreign technology companies including Google, Meta and Amazon. The Finance Bill amendments include this change which takes effect on April 1st 2025 to enhance trade relations between India and the United States.
The tax system implemented in 2016 required foreign digital firms to contribute to Indian taxation even though they lacked physical presence in the country. The tax regulation established equality between domestic Indian businesses and international online companies.
The tax removal occurred because of US criticism that it discriminated against American businesses. The tax burden from the equalisation levy caused Google and Meta to increase digital marketing expenses for Indian advertisers. The removal of this tax regulation will decrease advertising expenses for businesses and stimulate their digital advertising spending.
The removal of this tax will decrease the tax responsibilities of Google, Meta and Amazon while increasing their profit margins. The tax reform represents India’s second step toward easier taxation and business-friendly policies after eliminating the 2% non-resident e-commerce tax.
