In a significant move, the Centre has proposed abolishing the Equalisation Levy, or digital tax, on online advertisements starting April 1, 2025. This decision is set to benefit advertisers on digital platforms such as Google, X, and Meta. These Changes are a part of the 59 amendments to the Finance Bill introduced by Minister of State for Finance Pankaj Chaudhary in the Lok Sabha.
Why This Move By The Government
As part of the amendment which will be effective from April 1, 2025, the 6 per cent Equalisation Levy on online advertisements will be abolished. By eliminating the digital tax, the government aims to ease the financial burden on advertisers and reduce costs for the digital platforms. This will foster a more competitive online ad ecosystem. The new move will reduce the tax burden on digital ad consumers and costs on platforms like Google, X and Meta.
Levy On Online Advertisement Imposed In 2016
The Equalisation Levy on online advertisement services was imposed on June 1, 2016. This was applicable not only online advertisement services, It was applicable for digital advertising space, or any other facility or service for the purpose of online advertisement only. As per the amendments proposed in the Lok Sabha, Section 163 of Finance Act,2016, levying Equalisation levy will not apply on or after April 1, 2025.
Ease Tensions With US
Experts suggest that this decision aims to ease tensions with the United States, which had threatened reciprocal tariffs starting April 2. The abolition of the levy is expected to reduce the tax burden on digital advertisers and address concerns from international partners about its unilateral nature. They also believe that eliminating the Equalisation Levy aligns with the ongoing effort to simplify income tax legislation.
In addition to scrapping the Equalisation Levy, the government has proposed amendments to ease offshore fund investments. It has also introduced changes related to tax assessments in cases of search and seizure, as well as measures for reconciling income tax returns.
How The New Move Will Benefit Tech Giants
Abolishing the Equalisation Levy on online advertisements will significantly benefit tech giants like Google, Meta, and X (formerly Twitter) in several ways: Digital platforms like Google and Meta currently pay a 6% Equalisation Levy on ad revenues earned in India.
- The removal of this tax will directly increase their profit margins.
- It will make digital advertising on these platforms more cost-effective for businesses.
- This move could attract more advertisers, further boosting ad revenues.
- It aligns with efforts to simplify tax regulations and ease international trade tensions.
Why Was The Tax Introduced?
Introduced in 2016, the tax aimed to ensure that foreign tech giants contributed their fair share while earning revenue from India. Removing it brings India in line with global tax agreements and makes the country a more welcoming market for international digital companies.
