India Moves to Scrap 6% Digital Ad Tax Amid U.S. Trade Talks

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India plans to eliminate a 6% tax on digital advertisements, which mainly impacted U.S. tech giants like Google, Meta, and Amazon. This move is intended to ease U.S. concerns and pave the way for a trade agreement between the two countries.

The Indian government aims to address Washington's concerns after President Donald Trump threatened reciprocal tariffs starting April 2, which raised alarms among exporters. The proposal to scrap the tax will be part of amendments to the Finance Bill 2025 and is expected to be approved by Parliament this week, with the changes taking effect from April 1.

India's finance ministry has not yet commented on the issue. During Prime Minister Narendra Modi's recent visit to the U.S., both nations agreed to work on the first phase of a trade deal, with a target of reaching $500 billion in two-way trade by 2030.

The 6% equalization levy, which applies to online advertising services provided by foreign companies, requires them to withhold and pay the tax to the Indian government. The U.S. Trade Representative had criticized the levy, calling it "discriminatory and unreasonable," as it did not apply to domestic companies.

A U.S. delegation, led by Brendan Lynch, the assistant U.S. trade representative for South and Central Asia, is currently in India for talks with local officials. Last year, India also removed a 2% levy on non-resident e-commerce firms providing online services.

Analysts believe this new step will offer relief to U.S. tech companies and is part of India's efforts to ease trade tensions with the U.S. However, it remains uncertain whether this move, along with ongoing diplomatic negotiations, will result in a change in the U.S. position, according to Amit Maheshwari, a tax partner at AKM Global.

Paraphrasing text from "Reuters" all rights reserved by the original author