India’s Equalisation Levy more commonly referred to as the “Google Tax” – was introduced in 2016 to tax cross-border digital advertising transactions. It specifically targeted non-resident digital platforms earning revenue from Indian advertisers, even when those platforms had no physical presence in the country. The tax was levied at 6% on the gross payment made by Indian businesses to these platforms, provided the invoice was raised outside India and paid in foreign currency.
The stated aim was to ensure a level playing field for domestic digital players who were subject to Indian income tax, unlike their foreign counterparts.
Now, in a bid to ease the tax burden on advertisers and align with global tax norms, the Indian government has proposed eliminating the 6% levy on online advertising. Here’s what that could mean for the key stakeholders involved.
What it means for Big Tech
If the proposal is approved, foreign digital giants like Google and Meta who together account for nearly 65% of India’s Rs 50,000 crore digital advertising market – stand to benefit indirectly, as advertisers would face lower overall costs when placing ads on their platforms.
“The proposed removal of the 6% equalisation levy on online advertising is a welcome and pragmatic move,” said Ambika Sharma, Founder and Chief Strategist, Pulp Strategy. “This levy, introduced in 2016, applied specifically to non-resident companies providing online advertising services to Indian businesses, where the invoicing occurred outside India and payments were made in foreign currency. It did not apply to platforms operating through Indian entities like Google India or Meta India, but was commonly triggered when advertisers transacted directly with platforms like LinkedIn Ireland or Google Singapore.”
While the levy was initially seen as a necessary correction to address base erosion and profit shifting by multinational tech companies, its day-to-day impact created hurdles for advertisers. In practice, Sharma believes the revenue generated from this levy was limited, but the compliance burden was and is significant, especially for smaller advertisers and D2C brands navigating cross-border billing structures.
Karan Khanna, Co-Founder & COO of Huella Services, has seen the levy’s effect on ground-level execution. “From a tax standpoint, it often requires grossing up payments in the cases where the second entity is not established in India, which adds to the cost and creates ambiguity – especially when you factor in withholding tax and GST. Operationally, EL compliance is still largely manual – calculating, deducting, and filing quarterly returns. This adds a significant workload for agencies, especially when running multi-platform campaigns.”
“Most major players now have Indian entities, so taxation isn’t a significant issue for them. However, some international platforms are still subject to the levy,” said Gaurav Arora, Co-Founder at Social Panga. “As a result, ad rates have increased, making it more challenging to serve both Indian and global businesses. The additional cost—at least 6% higher—directly impacts campaign efficiency, reducing the return on investment per dollar spent.”
While the 6% Equalisation Levy was originally intended to level the playing field between foreign digital platforms and Indian entities, its removal presents a mixed picture for domestic ad agencies.
On one hand, the change could reduce compliance burdens especially for agencies running campaigns across multiple platforms or handling international invoicing. As earlier noted by Khanna, EL compliance adds significant workload which is a concern for agencies navigating cross-platform campaigns.
However, the flip side is that foreign platforms like Google and Meta may become more cost-competitive again, potentially drawing ad budgets away from Indian ad networks and publishers. Smaller Indian agencies that once benefited from the levy’s pricing impact may lose that edge.
The impact, therefore, will vary depending on agency scale and client base. For firms with international operations or multi-platform campaigns, simplification and operational ease may outweigh the downside. For local networks and publishers, the rollback could revive competitive pressures from global giants.
What it means for India
India’s introduction of the Equalisation Levy made it one of the first movers in global digital taxation. The proposed removal now signals its intent to align more closely with the OECD’s “Pillar One” framework, which seeks to establish a fair global tax architecture for digital companies operating across borders.
According to digital marketing experts, the potential withdrawal of this levy simplifies taxation, reduces operational friction in digital media planning, and aligns India more closely with the OECD’s global tax framework. For Indian ad companies, this change will streamline invoicing, reduce withholding complexities, and support a more seamless digital advertising ecosystem.
However, there are caveats. “Given that the Equalisation Levy has become a substantial revenue source for the Indian government and offers enforcement simplicity, it is unlikely that India will withdraw it in the near future unless the OECD’s Pillar One delivers both legal certainty and fiscal equivalence,” said Sonam Chandwani, Managing Partner at KS Legal & Associates. “Advertisers and media entities must therefore prepare for a dual regulatory landscape in the foreseeable future.”
Khanna noted that the levy has already led many advertisers to reevaluate their media mix. “We’re seeing brands relook at their media mix—not just to cut costs but to simplify execution. Indian publisher networks and affiliate models are gaining interest for this reason,” he said.
He added that the removal of the levy could further ease operations: “As the ecosystem evolves, the removal of the levy may further influence how international platforms structure their operations to serve Indian clients more efficiently.”
What it means for domestic media houses
One of the lesser-discussed ripple effects of the Equalisation Levy has been its role in nudging brands toward domestic alternatives. Rising costs and tax complexities have made Indian platforms more attractive than before, not just as fillers, but as strategic choices.
“Without a doubt. The Equalisation Levy isn’t just another tax, it’s a reset button for media buying in India,” said Sindhu Biswal, CEO & Founder of Buzzlab. “For years, brands and agencies have mindlessly funneled ad budgets into Google, Facebook, and Amazon, treating them as the default choice. But now, with costs rising and Big Tech quietly passing the tax onto advertisers, brands are forced to rethink where their money actually works hardest.”
“Over the next year, expect a bigger shift toward Indian ad networks, direct publisher deals, and hybrid media strategies,” Biswal added. “ShareChat, JioAds, and Times Internet aren’t just backup options anymore, they’re becoming core to media plans.”
But while brands are becoming more adventurous with their media mix, not every platform is easily replaceable. “If a platform holds a monopoly in reaching a specific audience—such as LinkedIn in B2B marketing—it’s difficult to replace. However, where viable alternatives exist, brands are always on the lookout for better options,” said Arora.
This rethinking of media strategy isn’t just about platform choices – it’s also about how brands collect and use data. As brands grapple with rising costs and tighter privacy frameworks, their strategies are also evolving. Ramya Ramachandran, Founder, Whoppl and Rohit Sakunia, Founder and Director, ArtE Mediatech jointly noted that this shift is fueling a more data-first approach. “With rising tax burdens, brands are prioritizing first-party data for better targeting and retargeting. This shift is driving the growth of tech-driven media ecosystems – similar to the trends seen in China and Silicon Valley. The industry is adapting to a more data-driven, technology-led future,” they said.
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