The equalisation levy, introduced in 2016 and expanded in 2020, was aimed at taxing large foreign digital companies– such as Google and Meta– that generate substantial revenue from Indian users without maintaining a local physical presenceread moreIndia is set to remove the contentious 6 per cent equalisation levy on digital advertising services – commonly referred to as the “Google tax” – from April 1, as part of a broader effort to defuse tensions with the United States and avoid retaliatory tariffs on Indian exports.The measure was included in a set of 59 amendments to the Finance Bill tabled in Parliament on Monday (March 24) by Finance Minister Nirmala Sitharaman.AdvertisementThe move, a major policy reversal by the Indian government, comes just days before President Donald Trump is expected to announce trade measures targeting countries that impose digital taxes on US technology giants.What is the equalisation levy?The equalisation levy, introduced in 2016 and expanded in 2020, was aimed at taxing large foreign digital companies– such as Google and Meta– that generate substantial revenue from Indian users without maintaining a local physical presence.However, the tax has long been a source of friction with Washington, which views it as a unilateral and discriminatory move against American firms.Economic Times cited government officials as saying that India collected Rs 3,343 crore from the equalisation levy in the current financial year up to March 15, 2025.Diplomatic significance of the moveNew Delhi’s latest decision appears to be a pre-emptive gesture as Trump prepares to announce
new tariffs from April 2.While the removal of the Google tax may be seen as a retreat by some, it is likely to be welcomed by global investors and tech firms.Monday’s amendment also proposes scrapping certain income tax exemptions previously offered to digital firms in lieu of the equalisation levy. That signals a clean break from the current regime.Alongside the rollback of the equalisation levy, the Finance Bill includes amendments to encourage offshore funds to relocate to India and clarifies the scope of income uncovered during search and seizure operations.More from India
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