Equalisation Levy

News- The government has proposed the abolition of the 6% Equalisation Levy on online advertising in the Finance Bill 2025. This move will benefit advertisers on digital platforms like Google, X and Meta.

About Equalisation Levy

• The Equalisation Levy was introduced in India through the Finance Act, 2016, to tax digital transactions—specifically, income earned by foreign e-commerce companies from Indian sources.
• It is aimed at taxing business-to-business transactions.
• It is also often referred to as the “Google Tax.
• It is a direct tax, which is withheld at the time of payment by the service recipient.
• Conditions for Equalisation Levy Applicability:
  • The payment should be made to a non-resident service provider;
  • The annual payment made to one service provider exceeds Rs.1,00,000 in one financial year.
• Services covered under Equalisation Levy:
  • Online Advertisement Services (Effective from June 1, 2016).
  • Any provision for digital advertising space or facilities/services or selling goods to Indian residents, or users accessing services/goods through Indian IP addresses (Effective from April 1, 2020).
  • It was also mentioned during the introduction of the levy that as and when any other services are notified, these will be included with the aforesaid services.
• Equalisation Levy Exclusion:
  • The non-resident service provider has a permanent office in India, and the requested service is linked to that permanent office/establishment.
  • The total consideration amount to be paid for the specific service payable or received is less than Rs.1 lakh.
  • The service described is not intended to be used to pursue a profession or work.
  • An exemption under section 10(50) of the Act is provided to avoid double taxation for any income arising from specified services provided on which equalisation levy is chargeable.
  • An income chargeable to tax as fees or royalties for technical services will not be included as income for the equalisation levy purposes.
• Tax Rates under Equalisation Levy:
  • For specified digital services, such as online advertising, the rate is 6% of the gross consideration.
  • For e-commerce transactions, such as online sale of goods or services, the rate is 2% of the gross consideration.