‘Google tax’ abolition: No major revenue gains for Big Tech, but a moral victory

New Delhi: India’s impending move to abolish the ‘Google tax’ is unlikely to be a significant gain for America’s Big Tech giants such as Google’s parent Alphabet Inc. and Meta Platforms Inc. However, the move is being widely viewed as an in-principle victory for Big Tech in India, while opening up the domestic market to more foreign e-commerce and small advertising firms.

India’s decision to scrap Google tax from 1 April is also likely meant to demonstrate to US President Donald Trump that India is serious about addressing pain points in bilateral trade relations, and to extract concessions on reciprocal tariffs.

New Delhi introduced the 6% equalisation levy in 2016 to ensure that foreign tech giants earning huge sums in India contributed proportionately to the government exchequer.

Meta and Alphabet senior executives, however, pointed out that the levy was already inapplicable at large on how the platforms sell online advertisements in India.

“The levy is only applicable if a foreign, non-permanent entity sells online advertisements in India. For Meta, for the past two fiscals, online advertisements across platforms were being sold and billed by Meta India Pvt. Ltd, which ensured that while we fall under the purview of India’s corporate taxes, the additional levy on offshore entities was no longer applicable to us,” a senior executive at Meta India told Mint.

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A second executive, who works directly with Google’s India division, added that while the abolition of the levy was welcome, the taxation’s impact on Google’s India revenue may not be directly proportionate “since Google bills its India advertising operation entirely under Google India Pvt. Ltd”.

“Abolishing the additional levy was a long-term ask put forth by Google in India in light of the company’s long-term commitment to developing India’s technology ecosystem,” the executive said. “Beyond any revenue or earnings impact, the removal of the equalisation levy is a win from a policy standpoint, ensuring a uniform online advertising industry in line with the rest of the world.”

The Meta and Google executives spoke on condition of anonymity.

Meta and Google’s India representatives did not respond to Mint’s request for a formal comment in light of the levy’s abolition not being formalized as yet.

‘An obvious next step’

Selling ads, as made famous by Meta chief Mark Zuckerberg’s “Senator, we run ads” comment at the pivotal 2019 Big Tech hearing at the US Senate, is the core business model for Meta and Google alike.

Meta runs Facebook, Instagram, Messenger and WhatsApp in India, while Google’s advertisements are applicable on Search and YouTube—the world’s largest search engine and video streaming platforms, respectively.

For each of these platforms, India is the largest market. Google’s YouTube, for instance, is estimated to have over 490 million active users in India, while Meta’s WhatsApp is estimated to have over 530 million active users here.

In 2023-24, Meta India generated ₹22,731 crore ($2.65 billion) in gross advertising revenue, and Google India about ₹31,221 crore ($3.64 billion). In February last year, market researcher Redseer Strategy Consultants pegged the Indian digital advertising industry to be worth $8.8 billion in FY24—Meta and Google, therefore, accounted for nearly 72% of this market.

Industry stakeholders and lawyers said the abolition of the Google tax “was a natural next step” for multiple reasons—including India’s push to open up the domestic economy to more foreign marketers, and to not attract reciprocal tariffs from Trump’s administration.

Also read | Have India-US trade talks blunted Trump’s threat of reciprocal tariffs?

“The levy served to largely restrict foreign e-commerce and smaller advertising players from selling ads in the Indian market if they did not have a permanent presence in India based on the definitions set forth in India’s foreign trade and online commerce policies,” said Akash Karmakar, partner at Delhi-based law firm Panag & Babu.

“The larger players, Meta and Google, have already been outside its purview due to them selling online ads through their local entities. As a result, this move, to be sure, is majorly to ensure that reciprocal tariffs are avoided, while opening up easier foreign business avenues for indigenous artisans looking to sell their craft in North America.”

Dhruv Garg, partner at technology think-tank India Governance and Policy Project (IGAP), said the move was “more to ensure that Big Tech, which plays a key role in India’s overall technology ecosystem, is kept at a level policy stance since India is a big exporter of technology talent and services to the US”.

“Additionally, the amount of revenue being generated by the levy was small in comparison to the larger overall picture, ensuring that the Centre had greater impetus in removing the levy from tech for long-term gains rather than retaining the levy for short-term benefits,” Garg added.