India Scraps ‘Google Tax’ – Introduction
India has announced the removal of its 6% Equalisation Levy, often referred to as the “Google Tax,” marking a significant shift in its digital tax policy.
This move comes as part of an effort to ease trade tensions with the United States and aligns with international negotiations for a global minimum tax.
But what does this mean in practical terms for India, global tech firms, and the wider international tax landscape?
What Was the Equalisation Levy?
The Equalisation Levy was introduced in 2016 as a 6% tax on online advertising revenues earned by non-resident digital companies.
This included giants like Google, Meta (Facebook), and Amazon.
Over time, the tax was expanded to include e-commerce services, creating friction with the US government, which argued that the levy unfairly targeted American firms.
Why Is India Repealing It Now?
The repeal of the Google Tax is closely tied to the Organisation for Economic Co-operation and Development’s (OECD) global tax reform deal, particularly Pillar One, which aims to reallocate taxing rights to market jurisdictions.
As countries prepare to implement this deal, the removal of unilateral digital taxes is seen as a step towards global harmony.
Additionally, the United States had threatened retaliatory tariffs on Indian exports if the tax was not scrapped.
By removing the levy, India is likely avoiding a trade dispute while signalling cooperation on international tax reform.
What Does This Mean for Global Tech?
For companies like Google and Amazon, the repeal simplifies their tax exposure in India. It also reduces double taxation risks and improves relations with one of the world’s largest digital markets.
However, this does not mean these companies will go untaxed.
The global minimum tax deal, particularly the reallocation of profits under Pillar One, will ensure they pay a fair share in market jurisdictions like India.
Will India Lose Revenue?
There’s a valid concern that scrapping the Equalisation Levy might reduce tax collections in the short term.
However, India hopes to recoup this through the multilateral OECD deal, which will give it new rights to tax profits of large multinational enterprises operating in the country.
Conclusion
India’s decision to scrap the so-called Google Tax is more than a domestic tax change—it’s a signal that global tax cooperation is finally gathering pace.
While it may look like a concession to the US, it’s also a forward-looking move that aligns India with evolving global norms.
Final thoughts
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