Threat of US reciprocal tariffs leads to removal of ‘Google Tax’ from 1 April 2025
India’s Lower House of Parliament has voted to withdraw its 6% Equalisation Levy from 1 April 2025. This is be contained within amendments proposed in the 2025 Finance Bill. The bill now moves to the Upper House and is likely to pass.
The charge, introduced in 2016, applies to B2B online advertising revenues made by offshore providers.
The move follows U.S. February warnings of tariffs on Digital Services Tax jurisdictions which target US online firms. The UK DST withdrawal is also reported.
1st Aug 2025: Budget removes contentious tax on non-resident providers of digital services
The latest Indian budget has confirmed the scrapping of the 2% equalisation levy on digital companies, online education-providing firms, and software-as-a-service (SaaS) providers without a permanent physical presence in India. This is in recognition of the progress being made on OECD Pillar 1 negotiations on taking foreign earnings by digital service providers. The change came into effect from 1 August 2025 via the 2024 Finance Bill.
April 2020: India has expanded its 2016 2% marketplace equalisation levy to non-resident marketplaces facilitating the sale of goods to consumers.
2016 Digital Services Tax equalisation levy
The levy on the digital economy was first introduced in the 2016 Finance Act at 6% as (effectively) a Digital Services Tax on non-resident providers of online advertising. It is structured as withholding tax – the India customer must remit 2% of the invoice direct to the tax authorities.
2020 expansion to e-commerce operators and facilitating marketplaces
From 1 April 2020, the levy was expanded to broader non-resident e-commerce sellers and marketplaces for B2C goods and digital services. There is an annual sales threshold of INR 20million (approx €230,000 or $270,000)
This included any of the following:
- Online sale of goods owned by the e-commerce operator
- Electronic services provided by the e-commerce operator
- Marketplace facilitating sale of goods for third-party sellers
Taxable sellers or facilitating marketplaces are responsible for charging and remitting the levy to the tax authorities on a quarterly basis.
India GST on e-commerce
Indian GST was introduced in 2017. India levies GST on digital services and e-commerce goods provided by non-resident or foreign providers and marketplaces. It also operates a 1% Tax Deducted at Source TDS on marketplaces processing sellers’ sales receipts since October 2020.
