India’s first step: Online ads will no longer attract 6% digital tax

New Delhi| India has decided not to impose a 6% tax on online advertisements as a first step to circumvent US President Donald Trump’s tariff policy. Colloquially called Google Tax, this equalization fee was introduced in 2016 so that foreign companies pay appropriate taxes here on earnings in India. Its removal will benefit leading American technology companies like Google, Meta and Amazon.

The Lok Sabha passed the Finance Bill with 35 amendments, including a proposal to remove the digital tax. Finance Minister Nirmala Sitharaman said, a strong economy is necessary to build a developed India. Our emphasis is on tariff rationalization and promotion of domestic manufacturing. Under this, customs duty rates on seven items are being reduced. The Bill ensures that imports will incur either a cess or a surcharge, not both.

According to the report of rating agency S&P Global, despite trade tensions arising from Trump’s threats, India’s economy is not likely to be adversely affected as it accounts for a high share in services exports. According to S&P, tariffs are mainly imposed on goods. Economies with a significant share of services exports will therefore be less affected by tariff measures. This can be considered beneficial for countries like Philippines and India. Fitch Ratings says that there is a risk to America’s trade policy, but less dependence on external demand will protect the Indian economy