In a major move, the Indian government has decided to remove the 6% Equalisation Levy, commonly known as the “Google Tax”. This tax was imposed on foreign digital companies like Google, Facebook, and Netflix for revenue earned from Indian users. The decision, announced on March 25, 2025, is expected to bring relief to global tech giants while also raising questions about its impact on India’s digital economy.
What Was the Google Tax?
Introduced in 2020, the Equalisation Levy was a 6% tax on payments made to foreign e-commerce companies providing digital services in India. The idea was to ensure that big tech firms paid their fair share of taxes, especially since many of them had no physical presence in India but earned significant revenue from Indian users.
For example, if an Indian business paid ₹1 lakh for Google Ads, a 6% tax (₹6,000) was deducted before the payment was sent abroad. This tax applied to companies like Google, Facebook, Amazon, Netflix, and other digital service providers.
Why Has the Government Removed It?
The government’s decision to scrap the Google Tax comes after pressure from foreign governments and trade bodies. Many countries, including the US, argued that such taxes unfairly targeted American tech companies. There were also concerns about double taxation, as some companies were already paying taxes under different agreements.
Another reason is India’s push for a global tax deal under the OECD (Organisation for Economic Co-operation and Development). Over 140 countries, including India, have agreed to a 15% minimum corporate tax for multinational companies. Since this new system will cover digital firms, India no longer needs a separate tax like the Equalisation Levy.
How Will This Impact Tech Giants?
The removal of the Google Tax is a big relief for companies like Google, Meta (Facebook), and Amazon. These firms had to either absorb the extra cost or pass it on to Indian businesses using their services. Without this tax, their operational costs in India will reduce, potentially leading to lower advertising and subscription costs for Indian users.
Small and medium businesses (SMBs) that rely on digital ads may also benefit. Many Indian startups and online sellers had complained that the 6% extra charge made digital marketing more expensive. Now, they might see some relief in their marketing budgets.
What Does It Mean for India’s Digital Economy?
While the removal of the tax is good news for foreign companies, some experts worry about revenue loss for the government. The Google Tax had brought in thousands of crores over the past few years. Now, India will have to depend on the global 15% tax agreement to collect revenue from these firms.
There are also concerns about whether Indian digital firms will face more competition. Since foreign companies now have one less financial burden, they might invest more aggressively in India, making it harder for local players to compete.
What’s Next?
India is now focusing on implementing the global minimum tax of 15% under the OECD agreement. This new system is expected to bring more fairness in taxation and prevent big corporations from shifting profits to low-tax countries.
For now, businesses and tech companies will be watching closely to see how this change affects their operations. If the global tax system works as planned, India could still earn significant revenue without needing separate digital taxes.
Final Thoughts
The removal of the 6% Google Tax is a significant step in India’s tax policy. While it eases the burden on foreign tech companies, the long-term impact on India’s digital economy remains to be seen. Will this move attract more global investment, or will it reduce government earnings? Only time will tell.
For now, businesses—both Indian and foreign—should stay updated on further tax reforms to make the most of this change.
