US President Donald Trump has warned of imposing reciprocal tariffs on many countries, including India, from April 2. But before that, the Indian government is going to take a big step. The government is proposing to remove the 6% equalization levy on online advertising services. This levy is imposed on companies like Google and Meta. It is commonly known as the ‘Google Tax.’. The government is thinking of removing it from April 1. That is, this tax can be removed a day before Trump’s tariff comes into effect.It is believed that this step is being taken to please Trump. Trump had threatened that if any country imposes a digital tax on US tech companies, he will impose retaliatory tariffs on them from April 2. Finance Minister Nirmala Sitharaman introduced 59 amendments to the Finance Bill in Parliament on Monday. This provision is included in those amendments. The proposal to remove the equalization levy has come amid trade agreement talks between India and the US.India wants to avoid a possible reciprocal tariff that will come into effect on April 2. The government has also proposed to remove the exemptions given to these companies under the Income Tax Act in lieu of the equalization levy. Sudhir Kapadia, senior advisor at EY, said that the removal of the equalization levy is a good move by the Indian government, as it was not earning much, and at the same time it was proving to be an alarm bell for the US administration.Similarly, Vishwas Panjar, partner, Nangia Andersen LLP, said that this decision not only brings certainty to taxpayers but also removes the concerns of countries that have been questioning the levy. This levy was imposed on advertisements on foreign online platforms in the Finance Act 2016. In 2020, the scope of this levy was expanded, and it was applied to all e-commerce companies at the rate of 2%.It was applicable to companies that did business of more than Rs 2 crore per year with Indian entities. The 2% levy was removed from August last year after retaliatory duties and a global tax agreement were agreed with the US. The government has collected Rs 3,343 crore from the equalization levy in the current financial year (till March 15).Its aim is to enhance India-US trade relations and benefit technology companies like Google and Meta.This move has been taken before the discussion on the bilateral trade agreement between India and the US and the imposition of reciprocal tariffs by US President Donald Trump on April 2. Experts believe that this move is an attempt to show flexibility in India’s trade stance and has been taken keeping in mind the US opposition. However, it is difficult to say whether India will be able to avoid the tariff war with America by removing the Google tax.Talking on this topic, Vishal Mehta, a business analyst, said, “US President Donald Trump had earlier warned that if India continues to impose this tax, then the US can also impose new taxes on India. This can affect Indian trade. The US is more angry about India’s 2% digital service tax. But the decision to remove the 6% tax is an attempt to improve trade relations between the two countries. All we can hope is India doesn’t face the wrath of the 25% global tariff policy of the US”.
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