Online Ads: Govt Proposes to Drop 6% Equalisation Levy

In response to shifting international economic conditions, the government has proposed the removal of the 6% equalisation levy on online advertisements, effective from April 1, 2025. This proposal is part of the amendments to the Finance Bill, 2025, which was passed by the Lok Sabha today and is now set for consideration by the Rajya Sabha.

The equalisation levy, often referred to as the ‘Google tax’, has been particularly notable for the contributions made by tech giants like Google, which pays the largest share of this levy in India.[1] The proposal to remove the levy is seen as an effort to adopt a more accommodating stance towards the United States, which has threatened to impose reciprocal tariffs starting April 2.

Introduced under Chapter VIII of the Finance Act, 2016, the equalisation levy was set at the rate of 6% of the amount of consideration for online advertisement received or receivable by non-resident persons from (i) a person resident in India and carrying on business or profession, or (ii) a non-resident having a permanent establishment in India. Correspondingly, income arising from online advertisements and chargeable to equalisation levy under said Chapter was exempted under Section 10(50) of the Income-tax Act, 1961.

In 2020, the scope of this levy was extended to e-commerce supply or services. However, last year, following concerns raised by stakeholders about the ambiguity of its scope and the resulting compliance burdens, the government removed the 2% equalisation levy on consideration received/receivable by e-commerce operators from e-commerce supply or services.[2]

[1] https://www.fortuneindia.com/business-news/google-meta-set-to-benefit-as-india-proposes-to-scrap-equalisation-levy-from-april-1/121377

[2] https://www.indiabudget.gov.in/budget2024-25/doc/memo.pdf