India plans to scrap digital ad tax to ease US concerns

NEW DELHI: India plans to scrap a contentious tax of 6% on digital advertisements that primarily affected U.S. tech giants such as Alphabet’s Google, Meta and Amazon, aiming to ease U.S. concerns and advance a trade pact.

New Delhi’s move seeks to assuage concerns raised by Washington after President Donald Trump threatened reciprocal tariffs from April 2 on trading partners, including India, that fuelled alarm among exporters.

The government proposes to abolish the 6% equalisation levy on online services, including advertising, as part of amendments to the Finance Bill 2025, a government source familiar with the matter said on Tuesday.

Parliament is expected to approve the bill this week, making the decision on the levy effective from April 1, the source added.

India’s finance ministry did not immediately respond to a request for comment.
During a visit last month to the United States by Prime Minister Narendra Modi, both nations agreed to work on the first phase of a trade deal by autumn 2025, targeting two-way trade of $500 billion by 2030.

India’s 6% equilisation levy, or digital tax, affects online advertising services provided by foreign companies, requiring them to withhold and remit the tax to the government.

The United States Trade Representative (USTR) had criticised the levy targeting U.S. companies as “discriminatory and unreasonable” arguing that domestic companies were exempt.

A U.S. delegation led by Brendan Lynch, the assistant U.S. trade representative for South and Central Asia, is visiting India this week for talks with officials.

Last year, New Delhi abolished a levy of 2% on non-resident e-commerce firms for providing online services.

Analysts said the new measure was likely to provide relief to U.S. tech companies.
The decision signals an attempt to ease trade tension with the United States, said Amit Maheshwari, tax partner at AKM Global.

“However, it remains to be seen whether this step, coupled with ongoing diplomatic efforts, will lead to any softening of the U.S. stance,” he added.