Centre Proposes Repealing 6% ‘Google Tax’ On Digital Ads

SUMMARY

Introduced as part of changes to the Finance Bill, 2025, the proposal to remove the levy was approved by the Lok Sabha and will come into effect starting April 1

The government collected INR 3,343 Cr in revenue from the equalisation levy during the ongoing fiscal year (FY25), till March 15

The move follows US President Donald Trump warning of retaliatory tariffs on countries imposing digital taxes on American tech firms, starting April 2

In a major relief for big tech giants Google and Meta, finance Minister Nirmala Sitharaman has proposed removing the 6% equalisation levy on online advertisements.

“(I) have proposed to remove (the) 6% equalization levy for advertisements,” Sitharaman said while introducing the plan before the Parliament. Introduced as part of changes to the Finance Bill, 2025, the proposal to remove the levy was approved by the Lok Sabha.

Meanwhile, Economic Times reported that the new changes will come into effect on April 1. As per the report, the Centre has collected INR 3,343 Cr in revenue from the equalisation levy during the ongoing fiscal year (FY25), till March 15.

What Is Equalisation Levy? Also colloquially referred to as Google Tax, equalisation levy was introduced by the Indian government in 2016 as a way to tax payments made by Indian businesses to foreign companies for digital advertising services.

The levy was envisaged to bring global tech giants, which do not have a presence in the country yet earn significant revenue in India, under the tax net.

Initially set at 6% for online advertising services, the levy was later expanded in 2020 to include a 2% tax on digital companies, online education providers, and software-as-a-service (SaaS) companies, which did not have a presence in India and had business exceeding INR 2 Cr in the country. The 2% tax was repealed last year following an agreement between India and the US.

What Sparked The Latest Proposal: The move follows US President Donald Trump warning of retaliatory tariffs on countries imposing digital taxes on American tech firms, starting April 2. The removal of the levy is expected to help India make a strong case in its ongoing trade talks with the US.

“Overall, these non-reciprocal taxes cost America’s firms over $2 Bn per year. Reciprocal tariffs will bring back fairness and prosperity to the distorted international trade system and stop Americans from being taken advantage of,” a fact sheet by the White House said earlier this year.

Effectively, the revocation of the levy will help India avoid conflict with the US on the issue.

The repealment of the tax will help global tech giants shore up their bottom lines. In addition, the move is expected to reduce costs for Indian advertisers, thereby increasing digital ad spending.