Equalisation levy (India)
The equalisation levy was India's tax on digital-economy revenue earned by non-resident companies. It started in 2016 as a 6% charge on online advertising services and was extended in 2020 to a 2% charge on e-commerce operators. It was India's answer to international rules that failed to capture tax from large digital platforms earning heavily from Indian users without a taxable presence in India, and because it sat outside India's Income Tax Act it was not covered by India's tax treaties. Both levies have now been repealed, on different dates and under different Acts: the 2% e-commerce levy was abolished from 1 August 2024, and the 6% advertising levy from 1 April 2025, in anticipation of OECD Pillar One.
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Example: a foreign platform's advertising revenue from Indian advertisers was charged the 6% levy at source, even though the platform had no taxable presence in India.
Why it matters to a small business: the levy fell on non-resident digital giants, not on small Indian firms. Its repeal, with no working Pillar One replacement yet in place, has left a temporary gap in how India taxes those giants.