India to scrap ‘Google Tax’ from April 1: What is it? Full details here

The Google tax was originally introduced in 2016 to ensure foreign digital service providers earning from India also contribute to the exchequer.

India will soon be removing the 6% equalisation levy, also known as the 'Google tax,' on digital advertising services provided by foreign technology firms such as Google or Meta.

The Google logo at the company's Bay View campus in Mountain View, California, on August 13, 2024. (Josh Edelson/AFP)

The decision is part of the new amendments to the Finance Bill and will come into effect from April 1, 2025, according to a MoneyControl report.

The Google tax was originally introduced in 2016 to ensure that such foreign digital service providers which are earning revenues from India also contribute to the exchequer, despite not necessarily having a physical presence.

This was to create a level playing field between Indian businesses subject to local taxes and the global ones operating through online platforms.

However, these taxes are now being removed as a step to ease trade tensions with the US, which had objected to it, calling it discriminatory against American firms.

According to the report, another reason is that Google and Meta passed the tax burden onto advertisers, increasing digital marketing costs for Indian enterprises.

The removal of the tax can benefit companies like Google, Meta, and Amazon which will see reduced tax compliance requirements as well as improved profit margins.

It will also lower the digital marketing costs of Indian advertisers and encourage digital advertising investments.

The decision also comes at a time when India earlier removed a 2% levy on non-resident e-commerce firms providing online services.