India to scrap digital ad tax, easing US concerns

New Delhi: India will scrap a tax of 6% on digital advertisements online, the finance minister said on Tuesday, easing costs for U.S. tech giants such as Alphabet's Google, Meta and Amazon as a way of soothing U.S. trade concerns.

The move responds to concerns raised by Washington after President Donald Trump threatened reciprocal tariffs from April 2 on trading partners, including India, that fuelled alarm among exporters.

Finance Minister Nirmala Sitharaman unveiled the change while introducing amendments to the 2025 Finance Bill in the lower house of parliament, which approved the tax measures in the budget.

"(I) have proposed to remove (the) 6% equalization levy for advertisements," she told parliament.

The decision on the levy takes effect from April 1, a government source said earlier, speaking on condition of anonymity.

During Prime Minister Narendra Modi's visit last month to the United States, both nations agreed to work on the first phase of a trade deal by autumn 2025, targeting two-way trade of $500 billion by 2030.

India's 6% equalisation levy, or digital tax, affects online advertising services provided by foreign companies, requiring them to withhold and remit the tax to the government.

USTR criticizes levy on American companies

The United States Trade Representative (USTR) had criticised the levy targeting U.S. companies as "discriminatory and unreasonable", arguing that domestic companies were exempt.

A U.S. delegation led by Brendan Lynch, the assistant U.S. trade representative for South and Central Asia, is visiting India this week for talks with officials.

Last year, New Delhi abolished a levy of 2% on non-resident e-commerce firms for providing online services.

Analysts said the new measure was likely to provide relief to U.S. tech companies.

The decision signals an attempt to ease trade tension with the United States, said Amit Maheshwari, tax partner at AKM Global.

"However, it remains to be seen whether this step, coupled with ongoing diplomatic efforts, will lead to any softening of the U.S. stance," he added.