CUTS hails India's move to scrap 6% equalisation levy, calls it a boost for digital business

CUTS International, a public policy research group at the forefront of highlighting taxation challenges in the digital economy, has welcomed the government’s decision to withdraw the 6% equalisation levy (EL) on online advertising services.

CUTS has been arguing that such legal frameworks struggle to effectively tax revenue generated through digital platforms operating across jurisdictions. The organisation had stated that the 6% EL on digital advertising only created regulatory uncertainty, as it effectively introduced double taxation, complicating business operations for global digital platforms in India. In its representation, CUTS had pointed out that by targeting foreign-based firms, EL added to regulatory complexity, deterring digital investment and innovation in India, one of the world’s fastest-growing digital economies.

“By removing the 2% e-commerce levy last July and now the 6% EL, the Indian government has taken the right and strategic step to create facilitative conditions for digital businesses by addressing regulatory uncertainties and easing the taxation system,” said Pradeep S. Mehta, Secretary General, CUTS International. “Reduced advertising costs would encourage higher spending on online platforms, subsequently benefiting small Indian businesses that depend on online advertisements,” he added.

The amendments introduced in the tax law through the Finance Bill 2025-26, which was passed in Parliament earlier this week, removed the 6% EL that India had been charging on digital advertisements since 2016 for payments exceeding ₹1 lakh a year to a non-resident service provider.

While some experts viewed this as a move to placate the US administration, which has threatened India with higher tariffs on goods imports, others welcomed it as a necessary step in itself.

“The government’s decision to do away with the equalisation levy in its entirety aligns with the current effort to simplify income tax legislation,” said Sumit Singhania, Partner, Deloitte India. “Even from an international tax policy standpoint, most unilateral measures undertaken by governments worldwide in recent years to address the growing tax challenges of digitalisation must be gradually phased out to make way for uniform tax rules under the two-pillar solution espoused by the OECD. Given the context in which the equalisation levy was enacted, this is a progressive policy move that restores a higher degree of certainty for taxpayers impacted by the levy,” he explained.