Finance Bill 2025: India Considers Removing 6% Equalisation Levy on Online Advertising by Google, Meta & Amazon amid US Tariff Threats

India is considering revising its tariff strategies by removing the 6% equalisation levy on online advertising services offered by global tech giants like Google, Meta, and Amazon. The changes come amidst increased pressure from the White House on reciprocal tariffs on the import of Indian-origin goods, steered by president Donald Trump.

The equalisation levy, often referred to as the “Google Tax,” was first introduced in 2016 to ensure foreign digital companies paid their share of taxes on revenue earned from Indian users. However, the tax has long been a point of dispute between India and the US, with Washington contending that the tax unfairly targets American firms and is inconsistent with international taxation principles.

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A previous US investigation into digital service taxes imposed by India and other nations pointed towards unfair tariff discrimination against American businesses in this regard. While India, in a bid to change its tariff policies to align with global best practices had effectuated the removal of a 2% digital services tax on e-commerce transactions last year following pressure from the US, the 6% levy on digital advertising had continued to subsist.

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President Trump, who had previously called India "one of the highest tariffing nations in the world." has not been subtle about his administration’s stance on India’s digital taxation policies. To drive home his point, Trump recently announced that Washington would impose reciprocal tariffs on Indian exports starting April 2 as part of his broader political strategy of using tariffs as leverage to pressure nations into trade concessions.

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While tax disputes loom in the air, US Assistant Trade Representative Brendan Lynch arrived in Delhi with a delegation to negotiate trade terms. The Indian government is expected to make its case for relief from reciprocal duties while laying the groundwork for a more comprehensive trade agreement between both countries.

India has already reduced import duties on key American goods like bourbon whiskey and high-end motorcycles and is considering lowering tariffs on automobiles, agricultural products, and chemicals to further appease Washington.

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Industry experts view India’s decision to remove the equalisation levy as a necessary step toward aligning with global tax norms. “The equalisation levy was always a temporary fix until a broader international consensus was reached. Scrapping it will provide much-needed certainty to businesses and help address US concerns over unilateral taxation,” said Vishwas Panjiar, a partner at Nangia Andersen LLP.

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While the proposed removal of the 6% equalisation levy on online advertising is a temporary fix in the trade war with the US, more developments and arenas are poised to be explored in the coming days.

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