From 1st of April India to remove: “Six Percent Equalisation Levy (Google Tax)”, is it an appeasement to US

Goodbye to 'Google Tax':

In a significant shift the 6% charge, often dubbed the 'Google tax,' levied on foreign tech giants like Google and Meta for their online ad services, is officially being phased out. The government has confirmed this move, part of amendments to the Finance Bill, the change coming in force from April 1, 2025.

Why Did India Have This Tax Anyway?

In 2016, India introduced 6% equalisation levy with a clear goal: to make sure major international tech companies earning significant revenue from the Indian market contributed fairly to the national tax pool, even without a physical office here. It was to level the playing field between these global players and local Indian businesses already subject to domestic taxes.

Why it was Changed?

The decision to scrap the levy seems driven by a couple of key factors. First, it was seen as a move to smooth over trade relations, particularly with the United States. The US government had previously objected to the tax, viewing it as unfairly targeting American tech companies.

Secondly, there were practical considerations. The levy required foreign companies to withhold and pay the 6% charge on revenue from Indian businesses using their ad platforms. According to some industry watchers, this often meant the cost was simply passed on to Indian advertisers, effectively making digital marketing campaigns more expensive. Removing the tax aligns with India's broader aim of simplifying its digital taxation rules and fostering better international trade ties, especially relevant given recent discussions around tariffs.

What Does This Mean for Businesses?

This change is expected to have the following after effects:

• For Tech Giants: Companies like Google, Meta, and potentially others offering similar services will welcome the reduced compliance burden and it will boost their profit margins from Indian operations.

• For Indian Advertisers: Businesses in India using these global platforms for their digital marketing efforts might see a reduction in their advertising costs. This could potentially free up budgets, allowing for broader reach or increased campaign frequency.

• For the Digital Economy: By lowering a financial barrier, the move could encourage more investment in digital advertising within India, contributing positively to the overall growth of the digital economy.

India had previously removed a similar 2% levy aimed at non-resident e-commerce operators. Scrapping the 6% 'Google tax' signals India's approach in adopting digital taxation frameworks that are more in line with evolving global standards.