The 6% levy, popularly referred to as the “Google Tax,” was primarily imposed on online promoting companies. As soon as abolished, this transfer is anticipated to ease the tax burden on Indian shoppers of digital promoting.
If the proposal is authorized by Parliament, the levy will not apply beginning April 1, 2025.
The removing of the levy is anticipated to profit firms promoting online promoting house, significantly main US-based mostly tech giants like Google and Meta.
Vishwas Panjiar, Companion, Nangia Andersen LLP, mentioned, “The equalisation levy was at all times an imperfect and symptomatic answer to convey digital transactions beneath taxation till a worldwide, all-encompassing consensus was reached amongst international locations. As well as to the equalisation levy, India additionally launched the idea of Important Financial Presence (SEP) in its home legislation to goal international firms with a considerable online presence in India. The federal government’s proposal to abolish the equalisation levy altogether is a step in the proper route, because it not solely supplies certainty to taxpayers but additionally addresses considerations raised by companion nations, such because the US, relating to the unilateral nature of the levy.”
The Equalisation Levy was first launched in 2016 to guarantee international digital service suppliers paid their justifiable share of taxes on income generated from Indian customers.
Through the years, the US has strongly opposed the tax, demanding a whole rollback. Regardless of this, India expanded the levy in 2020, including a 2% tax on e-commerce transactions involving international firms.
The federal government argued that these levies helped regulate cross-border digital transactions and ensured truthful taxation. Nevertheless, in 2021, a report by the US Commerce Consultant (USTR) criticised the expanded levy as discriminatory, stating that it disproportionately affected US-based mostly companies.
The two% tax coated a broad vary of companies, together with software program-as-a-service (SaaS), cloud companies, monetary companies, schooling companies, and digital gross sales.
Recognising these considerations, India started rolling again elements of the levy. Within the Union Price range 2024, Finance Minister Nirmala Sitharaman proposed eradicating the two% equalisation levy on e-commerce companies, efficient August 1, 2024.
Nevertheless, the 6% levy on online promoting remained in place.
With the newest modification to the Finance Bill 2025, specialists consider India is furthering its dedication to progressively decreasing digital taxation.
“The federal government had already eliminated the two% equalisation levy on e-commerce final yr. By proposing to eradicate the 6% levy on online promoting, India is signaling a extra accommodative stance in direction of the US. This may scale back the associated fee borne by Indian shoppers of digital promoting on international platforms,” mentioned Amit Maheshwari, tax companion at AKM International.
Nevertheless, Maheshwari famous that it stays to be seen whether or not this transfer, together with ongoing diplomatic efforts, will lead to a softening of the US stance on India’s digital taxation insurance policies.
Anil Talreja, Companion, Deloitte India, mentioned, “The proposed amendments to the Finance Bill, 2025, are primarily clarificatory. They align with the federal government’s goal of addressing doubts and challenges confronted by taxpayers and companies. On the similar time, the federal government stays targeted on finalising the brand new Earnings Tax Bill, set to take impact from 1 April 2026. A number of stakeholder consultations are underway to collect suggestions and ideas for shaping this new tax framework.”
Pranav Sayta, Companion and Nationwide Chief, Worldwide Tax and Transaction Companies, EY India, mentioned, “The amendments present better readability in tax legal guidelines. For example, the presumptive tax provisions beneath the brand new Part 44BBD—relevant to non-residents offering companies or know-how for organising electronics manufacturing amenities—will apply even when the non-resident has a everlasting institution in India. Moreover, the particular tax charges beneath Part 115A is not going to apply in such circumstances. The amendments additionally introduce substantive modifications. The 6% equalisation levy on non-residents, utilized to consideration obtained for online commercials and associated companies, will probably be eliminated for funds obtained or receivable from 1 April 2025. Relating to the evaluation of undisclosed earnings discovered throughout searches, it seems that the pre-2003 block evaluation regime is being reintroduced in some kind.”
The response from international tech giants like Google and Meta will probably be carefully watched within the coming weeks.
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