Abolition of Equalisation Levy or Digital Tax on Online Advertisements Proposed From April 1
The move will benefit advertisers on digital platforms like Google, X and Meta and reduce the tax burden on digital ad consumers and costs on platforms for them
New Delhi: Amid the US tariff threats, the government on Monday proposed to abolish the equalisation levy or digital tax on online advertisements from April 1, a move that will benefit advertisers on digital platforms like Google, X and Meta and reduce the tax burden on digital ad consumers and costs on platforms for them. These changes are part of the 59 amendments to the Finance Bill introduced by Minister of State for Finance Pankaj Chaudhary in the Lok Sabha.
However, experts are of the view that this move of the government is aimed at showing an accommodative stance to the US, which has threatened to introduce reciprocal tariffs from April 2. As part of the amendment, effective April 1 this year, the government will do away with the 6 per cent equalisation levy on online advertisements. The equalisation levy on online advertisement services was imposed on June 1, 2016.
As per the amendments proposed in the Lok Sabha, Section 163 of Finance Act, 2016, levying equalisation levy will not apply on or after April 1, 2025. The Finance Act 2020 has extended the scope of this levy to e-commerce supplies and services made on or after April 1, 2020. This 2 per cent equalisation levy on e-commerce transactions was abolished on August 1, 2024.
However, Deloitte India Partner Sumit Singhania said the government's move to do away with the equalisation levy in its entirety is in sync with the present endeavour of carrying out simplification of income tax legislation. “Although the 2 per cent levy garnered more criticism from the US, in anticipation of more tariff retaliation by them, the government is trying to show a more accommodative stance,” said AKM Global Tax Partner Amit Maheshwari.
“The removal of the 6 per cent Equalisation Levy on online advertising is a step in that direction. However, it remains to be seen if this step, coupled with already ongoing diplomatic measures, would lead to any softening of stance by the US,” Maheshwari added.
Earlier in day, during the discussion on the finance bill, Congress MP Shashi Tharoor flayed the Finance Bill saying it is a ‘classic case of patchwork’ and India's GST is the ‘most complex tax’ in world, even as BJP's Nishikant Dubey defended it asserting that Congress' agenda is to oppose everything without looking at the positives.
Initiating the debate on the Finance Bill in Lok Sabha, Tharoor also alleged that the BJP government's economic management is facing structural challenges. “The finance minister's budget speech in this house reminded me of the garage mechanic who said I couldn't fix your brakes, so I made the horn louder but looking at the Finance bill, she is now saying to taxpayers, I couldn't repair the roof but I brought you an umbrella,” he said.
Tharoor also said India has the most confusing and complex GST structure in the world. “Instead of the good and simple tax we all wanted, India has multiple and confusing GST rates, including the highest GST rate in the world, at 28 per cent but tax revenues are still at 18 percent of GDP," he said, adding China has 13 per cent GST cap, but they collect 20 percent of GDP.
“Vietnam has an even lower 8 per cent cap and collects 19 per cent of GDP. Thailand, GST is only 7 per cent, and they get a net 17 percent of GDP. Now, beyond exorbitant rates, our system carries a dubious tax, the dubious burden of being the most complex tax in the world. 77 countries have GST, and they impose only one or two tax labs. This multi-rate structure in our country has further raised the compliance burden for businesses,” he said.
However, BJP’s Nishikant Dubey dismissed the Tharoor claim, saying that it is a known fact that the country's economy, which was worth $2 trillion, has increased to $4.5 trillion in the last ten years. Observing that the Budget does not provide a magic solution to all problems, he said that it is a result of hard work aimed at helping the workers. “It is Congress' agenda to oppose everything without looking at the positives. You need to answer what did you (Congress) do for the poor and salaried class,” he added.
