India Moves to Remove Equalisation Levy
India plans to abolish its 6% digital tax on online advertisements, a move aimed at easing US concerns and advancing a trade deal. The tax primarily affected major US tech firms such as Google, Meta, and Amazon.
The government is expected to include this change in the amendments to the Finance Bill 2025. A government source confirmed on Tuesday that Parliament is likely to approve the bill this week, making the tax removal effective from April 1. The finance ministry has not yet commented on the decision.
Easing US-India Trade Tensions
The decision comes as India and the US work towards the first phase of a trade pact, following Prime Minister Narendra Modi’s visit to the US last month. Both nations aim to boost bilateral trade to $500 billion by 2030.
Washington has been critical of India’s digital tax, with the US Trade Representative (USTR) calling it “discriminatory and unreasonable” since domestic companies were not subject to the levy. In response, former US President Donald Trump threatened reciprocal tariffs, raising concerns among Indian exporters.
A US delegation led by Brendan Lynch, the assistant trade representative for South and Central Asia, is currently in India for discussions with government officials.
Relief for US Tech Firms
The 6% equalisation levy required foreign companies to remit tax on online advertising services. Its removal follows India’s earlier decision to scrap a 2% levy on non-resident e-commerce firms. Analysts suggest that eliminating these taxes will provide relief to US tech companies and improve trade relations.
Amit Maheshwari, tax partner at AKM Global, stated that the move signals India’s attempt to ease trade tensions. However, he noted that it remains uncertain whether the US will soften its stance on other trade issues.
With inputs from Reuters
