In a move aimed at improving trade ties with the United States, India is set to eliminate its 6% equalisation levy on digital advertising services—a tax that has disproportionately impacted major U.S. tech companies such as Google, Meta, and Amazon.
The proposed rollback is expected to be part of the upcoming amendments to the Finance Bill 2025 and, if approved by Parliament this week, will take effect from April 1. This decision marks a shift in India’s digital taxation policy, which had previously drawn sharp criticism from Washington for unfairly targeting American firms.
Introduced in 2016, the equalisation levy applied to foreign digital companies earning revenues from Indian advertisers. While intended to ensure fair taxation in the digital economy, the levy became a flashpoint in U.S.-India trade relations, prompting the U.S. Trade Representative to label it “discriminatory.”
The timing of this policy reversal is crucial. With both nations working toward a preliminary trade agreement slated for completion by autumn 2025, the removal of the levy appears to be a goodwill gesture from New Delhi to facilitate smoother negotiations. The two countries have also set an ambitious goal to double bilateral trade to $500 billion by 2030.
The recent visit of a U.S. delegation, led by Assistant Trade Representative Brendan Lynch, further underscores the ongoing diplomatic push to resolve trade irritants.
Analysts say the repeal of the levy will be a welcome relief for global tech firms and could signal a more business-friendly digital tax regime ahead. However, whether this move alone will alter the U.S. stance remains uncertain.
Still, the decision reflects India’s broader intent to align its trade and tax policies with global norms amid an evolving digital economy.
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