India Kills ‘Google Tax’. Will It Raise Desi Tech Revenues?

In today’s bustling, tech-savvy times, the trend has juxtaposed to taxes collected by the exchequer. We are talking ‘Google Tax’ — a synonym that has now become the norm — levies imposed by the government on digital advertising revenues.

Union Finance Minister Nirmala Sitharaman kicked off a social media debate by announcing the end of the digital advertising tax of 6 per cent from April 1, 2025. “Equalisation levy on online ads will be abolished, removing uncertainty in present international economic conditions,” Sitharaman said. For the uninitiated, ‘equalisation levy’ is how business dictionaries define the digital advertising tax.

In a changing global recipe, some are welcoming the decision as ‘strategic and pre-emptive’, especially at a time that the US is quite zealous in unfurling its new, notorious red and blue tariff flag. Some are miffed — they don’t see any real benefits percolating down to Indian firms.

The Finance Minister’s move unequivocally puts to rest concerns raised by US President Donald Trump, who has repeatedly warned all trading partners of a reciprocal tariff strike on April 2.

Just some hours after she assumed office on March 26, US trade representative Katherine Tai said: “Digital (ad) levies primarily affect (our) tech giants like Google, Meta and Amazon, which are being unfairly targeted.”

US Tariff Fallout: Some Roar, Others Capitulate

Tariff offensives by the US since January 20, when Trump returned as US President, have evoked mixed global response. More than a few citadels of resistance have been flattened, while some time-tested marriages have imploded — Canada, Mexico and EU in particular. The ensuing economic stalemate has seen nations like South Korea, Thailand and India walking a careful middle path.

With no readily-visible expiry date, the tariff medicine is also sending shivers down the spine of the corporate world, particularly in industries such as automobiles, technology, healthcare and power. It has forced many nations into a huddle, negotiating with one another, and with a US whose leadership seems adamant on ‘Make(ing) America Great Again’.

India too has been taking careful and calibrated steps. In February itself, Prime Minister Narendra Modi met Trump and the two agreed to formalise a bilateral trade agreement. The revenue implications are significant, a whopping US$ 500 billion by 2030. An intrinsic but unreported part of their agreement is to revisit painstakingly-identified tax heads, an unuttered pre-condition to continued diplomatic amity.

War outlines crystallised, the US has moved from stealth to fast-track mode to seal the deal. Brendan Lynch, assistant US trade representative, is already in India to iron out any dinks in the agreement.

India is moving fast too, it would seem, as Lynch’s visit comes just a fortnight after Union Commerce Minister Piyush Goyal’s recent trip to the US for discussions with top government officials.

Advantage Google, Meta & Amazon. What of Indian firms?

The tax-delete will be a shot in the arm for international protectionism and economic muscle-flexing, with Google, Meta, Amazon and other US firms gaining from the move. India is positioning the change as one that is in keeping with the “rationalisation of the tax structure”. A Finance Ministry official said: “In the Budget, we promised to simplify the tax regime. This is a part of that larger strategy.”

The government’s declared objective and digital-sense says Indian companies will also benefit. With effective revenues going up for global firms, costs may go down for advertisers on these platforms. As a result, basic business sense begs the conclusion that advertising will go up.

Analysts and experts disagree. “The assumption is that outreach and customer engagement on digital platforms will get more cost-effective,” says Jayanti Shreyan, a digital advertising manager.

“That will happen only on international platforms. This move is only about appeasing those who are threatening us with tariffs. Local and desi platforms will not see any increase in profitability.”

Sanjay Singh, ad manager with a newspaper, says digital ads will not just start jumping. “You are not going to start advertising with me just because Google and Meta will now earn more.

The question is whether you and I benefit; I don’t see that happening. Advertisers will see lower spends only if they go global, if global platforms pass on the tax benefits to customers. There are too many ‘ifs’ here.”

Amit Maheshwari, tax partner at AKM Global, says the measure will primarily provide relief to US tech firms. “The decision signals an attempt to ease trade tensions with the US,” he adds.

Is There a Bull Here? Or Just An Economic Iceberg?

Asked offline about the 6-per cent ‘equalisation levy’, government officials admit it is just the “tip of an economic iceberg”. Commerce Ministry insiders say: “It is akin to retreating a few kilometres to gain much longer miles. After internal discussions, we are not averse to reducing tariffs on 55 per cent of US imports, just so what we may protect US$ 66 billion in exports.”

The stakes are high. Global Trade Research Initiative (GTRI) says if the US imposes country-level tariffs, most nations would suffer. For instance, India’s exports would face additional taxes of 4.9 per cent, compared to 2.8 per cent now.

Industry-wise drilldowns show farm exports would be the worst hit. Shrimp, dairy and processed foods exports would face additional tariffs of up to 38 per cent.

“Pharma will face an extra 10.9 per cent in duties, while diamonds and jewellery will have to pay 13.3 per cent more and electronics an additional 7.2 per cent. Only petroleum, minerals and garments will remain unaffected due to existing tariffs, the GTRI analysis reveals.

The US is the biggest market for Indian goods and services. According to USTR data, India’s trade surplus with the US was US$ 45.7 billion in 2024, 5.4 per cent more than in the previous year.

Total trade between the two countries was US$ 129.2 billion in 2024, with India’s exports at US$ 87.4 billion, up 4.5 per cent, while imports were US$ 41.8 billion, up 3.4 per cent.

Minister-Speak: India, US, Businesses Will Benefit

“Both countries (India and US) will negotiate a mutually-beneficial trade agreement. Both will focus on wider market access, lower tariff and non-tariff barriers, enhanced supply chain integration and resolution of trade issues,” Minister of State for Commerce Jitin Prasada informed Parliament last week.

When Prasada made his statement, the ‘Google Tax’ abolition had not been unveiled. This latest sop has now been unwrapped by Sitharaman herself. The ministers say this is part of a larger plan to simplify taxation and boost business.

India desperately needs both outcomes to come good, and more forward-looking steps. How and when they are announced and how they fare is the US$ 500-billion question.

(The writer is a veteran journalist and communications specialist. Views are personal)