India has withdrawn its two percent Google Tax in the country’s latest Budget.
The latest Budget, announced on July 23, states that the Google Tax (known as equalization levy) shall not apply from August 1, 2024.
The two percent Google Tax applied to consideration received for e-commerce supply of goods or services by non-residents. India was one of the first countries to adopt a Google Tax in the form of a unilateral domestic tax measure to tackle digital economy taxation.
At the time of introduction, the Indian government held the view that it will not wait for an international consensus on tackling the tax challenges posed by the digital economy under the aegis of the OECD.
The US Trade Representative had concluded that India’s Google Tax was discriminatory because it unfairly targeted US businesses. India, however, maintained its position that the tax was not discriminatory.
Last month, the OECD said that it is nearing international agreement on Pillar One, which would require countries to withdraw unilateral digital tax measures. It is not clear if India will sign this international agreement in view of the reservations expressed by the Indian government to the OECD.
The US Treasury Secretary had earlier publicly criticized India for stalling the OECD’s digital tax reform process.
India’s withdrawal of the Google Tax, however, is not linked to the discussions taking place at the OECD level because the Budget clearly notes that the tax has been abolished because it was ambiguous and led to compliance burden.