India Abolishes 6% Equalisation Levy on Digital Ads from April 1, 2025

Alankar Mishra

Author

Updated: 16-04-2025 at 12:56 PM

With the changes made to the Finance Bill of 2025, the Government of India is considering scrapping the Equalisation Levy (EL) charged to non-resident companies providing online advertisement services. As part of the 2016 Finance Act, the EL was implemented and has since caused friction with other nations, notably the United States.

This move is seen as a diplomatic and economic balancing act, coming just ahead of potential retaliatory tariffs from the US scheduled for April 2.

What Is The Equalisation Levy?

The Equalisation Levy (EL) was first introduced in 2016 at 6% for foreign businesses that derived income from advertising services in India. It was further extended to cover e-commerce operators in 2020 but at a lower rate of 2% in a bid to tax the digital economy.

In 2024, the 2% EL on e-commerce was abolished, but the 6% charge on digital advertising stayed.

Why Has The Levy Been Removed?

1. To Avoid Trade Tensions with the US

The suspension of EL impacted Google, Meta, and Amazon. The US raised a flag on what it thought was unreasonable digital taxation and wanted to impose tariffs. Removing the EL is considered benevolent by the Indian government and a way to settle these trade conflicts.

2. Alignment with Global Tax Frameworks

India and a host of other nations are moving to adopt a common international tax system as envisioned in the OECD’s Two Pillar Solution. This policy includes a multinational approach to the taxation of digital companies, which renders unilateral taxes such as the EL unnecessary.

3. Reduce Cost Burden on Advertisers

Indian businesses paying for digital ads shouldered the burden in the end. Its elimination is anticipated to reduce expenses related to digital advertising, thus making online marketing accessible for emerging businesses and Micro, Small and Medium Enterprises (MSMEs).

Impact On Digital Ecosystems

The recent shift in taxes and policies has been instrumental in developing India’s digital infrastructure, with positive effects on numerous parties. The reforms and restructures are directed towards building an equitable and cost-effective digital space which is in harmony with global standards.

Stakeholder	Impact
Indian Advertisers	Reduction in digital ad costs
Tech Giants (Google/Meta)	Lower compliance and tax burden in India
Government	Aligns with global tax standards; averts potential sanctions
Start-ups/MSMEs	Increased affordability in digital marketing

What's Next?

The global players are probably elated by India's decision to remove unilateral digital taxation, as it is perceived as a measure towards easier trade relations. Primary attention now lies with the execution of the OECD's Pillar One and Two tax rules, where India will remain highly engaged.

Conclusion

The Equalisation Levy is set to be abolished effective April 1, 2025, which signifies a change in India’s digital taxation policy. By reducing the advertisement tax, the government has shown its willingness to positively engage with the international community, foster fairer practices, and support the digital economy.

Join the conversation and stay informed! Visit the Jaagruk Bharat community page and be part of an active, engaged community as we work day and night to bring information to your fingertips.