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Informist, Monday, Mar. 24, 2025

 

NEW DELHI – The government on Monday proposed to introduce a sunset date for the 6% Equalisation Levy or digital tax on online advertisements as part of the 59 amendments to the Finance Bill, 2025, which is being debated in the Lok Sabha. According to tax experts, this proposal aims to move towards the Pillar II taxation system while also treading the path of being accommodative on the tariff front against the US' threat to introduce reciprocal tariffs from Apr. 2.

 

The Equalisation Levy was imposed on online advertisement services from Jun. 1, 2016. Last year, the government had already removed 2% Equalisation Levy on e-commerce transactions, but the 6% levy on online advertisements continued. "This change would now reduce the costs for digital advertisement consumers while lowering tax costs for digital advertisement platforms such as Google and Meta," Sandeep Jhunjhunwala, M&A Tax Partner at Nangia Andersen, said.

 
Minister of State for Finance, Pankaj Chaudhary, introduced the amendments to Finance Bill, 2025, in the Lok Sabha.

"Although, the 2% levy garnered more criticism from the US, but in anticipation of more tariff retaliation by the US, the government is trying to show a more accommodative stance and the removal of the 6% 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," AKM Global, Tax Partner, Amit Maheshwari said. 
 

Atul Puri, Managing Partner and Co-Founder, SW India explained that with the removal of the 6% Equalisation Levy, the government is trying to move towards the adoption of the Pillar II taxation system, but doubts on Pillar II adoption remain considering the US' diplomatic stance against it. "In that case, through notification, the government can notify continuing with Equalisation Levy keeping in mind India's exchequer's interest," Puri told Informist. Pillar II tax structure ensures that multinational enterprises pay a minimum tax of 15% on the local income arising in each jurisdiction where they operate. More than 130 countries, including India, have been working on a two-pillar taxation approach for more than a decade now.

 

Besides this key proposal, the government has also proposed several amendments to provisions related to search and seizure assessment. The government has added a new term "Total Undisclosed Income" to clarify that search and seizure proceedings were intended to bring only undisclosed income under tax.  End

 

Reported by Priyasmita Dutta 

Edited by Deepshikha Bhardwaj

 

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