- India will remove the 6% equalisation levy on digital ads from April 1 to ease trade tensions with the US.
- The decision comes ahead of potential US tariffs on Indian exports starting April 2.
- Tech giants like Google and Meta stand to benefit, while India explores alternative tax measures.
Why Was the Google Tax Introduced?
The equalisation levy, first introduced in 2016 and expanded in 2020, was aimed at taxing big foreign tech companies that earn revenue from Indian users without having a physical presence in the country. The tax primarily targeted firms like Google and Meta, ensuring they contributed to India’s economy. However, the US saw it as unfairly targeting American companies, leading to trade tensions between the two nations.
What’s the Diplomatic Impact?
India’s decision to scrap the tax comes just days before former US President Donald Trump is expected to announce tariffs on countries imposing digital taxes on American tech firms. By removing the levy, India hopes to prevent economic retaliation and create a more favorable business environment for global investors.
In addition to removing the Google tax, the Finance Bill also proposes other significant tax changes. These include eliminating certain tax exemptions for digital firms and encouraging offshore funds to relocate to India. The move signals a shift in India’s approach to taxing the digital economy, opting for broader tax reforms rather than direct levies on foreign tech giants.
Will this decision smoothen trade relations between India and the US? And what alternative tax measures might India implement in the future? Only time will tell.
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