India Proposes To Axe ‘Google Tax’ Amid Donald Trump’s Reciprocal Tariff Threat—What It Means
The 6% equalisation levy, also referred to as ‘Google Tax’ informally, will be scrapped as part of 35 amendments to the Finance Bill, 2025.
India plans to scrap a 6% tax on digital advertisements, a move that will ease costs for US technology giants such as Google, Meta, and Amazon. The decision, expected to come into effect from Apr. 1, aims to ease the ongoing trade tensions with the US under President Donald Trump.
The 6% equalisation levy, also referred to as ‘Google Tax’ informally, will be scrapped as part of 35 amendments to the Finance Bill, 2025. Finance Minister Nirmala Sitharaman confirmed the proposal to the Parliament. While the date of implementation was not discussed, a Reuters report suggested that it could be Apr. 1, a day before Trump's reciprocal tariffs on India are likely to take effect.
What Is Google Tax And How Does It Work?
In 2016, India introduced this 6% equalisation levy to create a level playing field for businesses. The 6% tax on digital ad revenues has been in effect for foreign companies, not based in India. Four years later, India expanded the scope of this tax to include a 2% tax on e-commerce revenues from non-Indian companies. In 2024, India removed 2% tax on non-resident e-commerce firms.
In addition to India, countries such as the UK, Austria, Greece, Italy, and Turkey also introduced similar taxation laws.
While some US officials have called this tax “discriminatory”, India justified it suggesting that it ensured fair play for all companies. For example, a company A has a regional office in India, while Company B operates online only. In such a case, while company A operates a facility and complies with norms, company B is partially free of such duties and can also spend more on ads. To create fairness, a 6% "Google tax" is applied to company B’s ads.
This law mostly impacted US businesses such as Google, Meta, and Microsoft, which are digital ad revenue-generating MNCs.
The latest move is being seen as a measure to avoid Trump’s reciprocal tariffs on Indian goods.
