India removes Google tax starting 1st April 1

India will eliminate its 6% digital advertising tax, known colloquially as the “Google tax”, starting April 1, in a strategic move to ease tensions with the United States and prevent potential retaliatory tariffs, Finance Minister Nirmala Sitharaman announced.

The decision directly responds to concerns raised by Washington, with President Donald Trump threatening reciprocal tariffs from April 2 on trading partners that impose digital taxes. The levy primarily affected U.S. tech giants like Google, Meta, and Amazon, whom the United States Trade Representative (USTR) has previously criticized as being unfairly targeted.

During Prime Minister Narendra Modi’s visit to the United State last month, both nations agreed to work on the first phase of a trade deal by autumn 2025, with an ambitious target of increasing two-way trade to $500 billion by 2030. The tax removal is seen as a crucial diplomatic step towards that goal.

A U.S. delegation led by Brednan Lynch, The assistant U.S. trade representative for South and Central Asia, is currently in India for discussions, further underscoring the diplomatic significance of this tax policy change.

The Finance Ministry, led by Nirmala Sitharaman, proposed the tax removal as part of 59 amendments to the Finance Bill, signaling a significant policy reversal just days before President Donald Trump is expected to announce trade measures against countries imposing digital taxes on American tech companies.

Government generated over Rs.3,000 crore from companies like Google and Met through ‘Google tax’.

The equalization levy, first introduced in 2016 and expanded in 2020, targeted foreign digital companies like Google and Meta that generate substantial revenue from India users without maintaining a local physical presence. While the tax had been a source of ongoing friction with the US government, it generated approximately Rs. 3343 crore in the current financial year.

The USTR had labelled the tax as “discriminatory and unreasonable,” arguing that domestic companies were exempt from such regulations.

The amendment also proposes scrapping certain income tax exemptions previously offered to digital firms, indicating a comprehensive approach to resolving international tax disputes. The decision follows a history of tensions, including previous threats of retaliatory tariffs by both the Biden and Trump administrations.

Government officials and economic experts view the move as a diplomatic strategy to smooth trade relations. By preemptively removing the digital tax, the government hopes to prevent potential economic repercussions and demonstrate its commitment to resolving trade disagreements through diplomatic negotiations.

Source The Times of India