In a significant move for the digital advertising industry, the government has proposed abolishing the 6% Equalisation Levy, a tax that primarily affected foreign digital service providers like Google and Meta. The decision is expected to benefit advertisers who rely on these platforms, reducing costs and fostering a more competitive online ad market.

Background of the Equalisation Levy

Introduced in 2016, the Equalisation Levy was designed to tax foreign digital companies that generate revenue from Indian advertisers without having a physical presence in the country. The levy applied to advertising payments made to non-resident digital firms, including Google, Meta (formerly Facebook), and other global tech giants. Over the years, it became a contentious issue, with digital companies and industry bodies arguing that it led to double taxation and increased advertising costs.

Why Is the Levy Being Scrapped?

The government’s decision comes amid growing efforts to align with global taxation frameworks and simplify compliance for businesses. India had previously agreed to transition away from the Equalisation Levy as part of discussions on a global tax deal under the OECD framework, which aims to ensure fair taxation of multinational tech companies.

Experts suggest that the abolition of the levy will reduce advertising expenses for businesses, particularly small and medium enterprises (SMEs) that depend on digital platforms for marketing. The move is also expected to improve trade relations with major economies, including the United States, which had raised concerns about the tax.

Impact on Digital Advertising and Businesses

With the proposed removal of the levy, advertisers in India will benefit from lower costs on platforms like Google Ads, Facebook Ads, and other digital marketing services. This could lead to increased investment in digital advertising, further accelerating India’s digital economy.

Industry leaders have welcomed the decision, stating that it will create a fairer playing field for businesses and encourage more innovation in digital marketing strategies. However, some analysts caution that the government may explore alternative taxation measures to ensure continued revenue from the rapidly growing digital sector.

What’s Next?

The proposal to abolish the 6% Equalisation Levy will now be reviewed as part of upcoming legislative discussions. If approved, the new tax framework will be implemented in the coming months, offering relief to businesses that rely on digital advertising for growth.

As India moves toward a more balanced global tax system, businesses and advertisers will closely watch how these policy changes shape the future of digital marketing and taxation in the country.