Equalisation levy of 6% on online ads likely to be scrapped from April 1

The government is expected to abolish the equalisation levy on online ads with effect from April 1 this year.

As per sources, the move is likely to be a part of the amendments to the Finance Bill, 2025. The 6% levy, that was introduced as part of Finance Bill 2016 and is charged on “the consideration paid or payable for the services in the nature of online advertisement, provision for digital advertising space, any other facility or service for the purpose of online advertisement”. In effect, it is levied on payments to online majors such as Google and Meta.

The move significantly comes at a time when concerns have been raised on the issue by several nations, including the US.

Vishwas Panjiar, Partner, Nangia Andersen noted that the equalisation levy was always an imperfect and a symptomatic solution to bring digital transaction under tax, till the time a global and all-pervasive consensus was reached between countries. In addition to equalisation levy, India also introduced the concept of Significant Economic Presence (SEP) in its domestic law to target foreign companies having significant online presence in India.

“The government’s move to propose abolition of equalisation levy altogether, is a step in the right direction as it not only brings certainty to taxpayer but also addresses the concerns raised by partner nations (like the US) regarding the unilateral nature of the levy in the first place,” he said.

The Finance Act, 2020, had also extended the scope of this levy to e-commerce supply and services made on or after April 1, 2020, at the rate of 2%. However, it was abolished in the Union Budget presented in July 2024 with effect from August.

According to sources, apart from the abolition of the equalisation levy on online ads, the amendments to the Finance Bill 2025 are not very substantial in nature and largely are only procedural.

The Lok Sabha took up the Finance Bill for consideration and passing on March 24.