India is set to eliminate a contentious 6% tax on digital advertisements, a move aimed at addressing concerns raised by the United States and advancing a potential trade agreement. The decision, which primarily impacted U.S. tech giants like Google, Meta, and Amazon, is expected to help ease trade tensions ahead of a crucial pact with Washington.
The announcement comes in response to U.S. President Donald Trump’s threat of reciprocal tariffs, which were set to take effect on April 2. This sparked alarm among Indian exporters, prompting the Indian government to act swiftly. A government source revealed on Tuesday that the 6% equalisation levy on online services, including advertising, will be removed as part of amendments to the Finance Bill 2025.
India’s parliament is expected to approve the bill this week, with the new measure set to take effect from April 1, the source added. India’s finance ministry, however, did not respond to requests for comment.
The move is seen as part of broader efforts to ease tensions between the two countries. During Prime Minister Narendra Modi’s visit to the U.S. last month, both nations agreed to initiate the first phase of a trade deal by autumn 2025, targeting a bilateral trade value of $500 billion by 2030.
The controversial 6% digital tax, or equalisation levy, targeted online advertising services provided by foreign companies, compelling them to withhold and remit the tax. The U.S. Trade Representative (USTR) had criticized the levy, calling it “discriminatory and unreasonable,” arguing that domestic firms were exempt from the charge.
In a related development, a U.S. delegation led by Brendan Lynch, the Assistant U.S. Trade Representative for South and Central Asia, is currently visiting India for trade discussions.
Last year, India also abolished a 2% levy on non-resident e-commerce companies providing online services. Analysts believe that the latest tax repeal is likely to provide relief to U.S. tech firms.
According to Amit Maheshwari, a tax partner at AKM Global, the move signals an effort by India to ease trade tensions with the U.S. “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 said.
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