Evaluate the significance of India’s decision to abolish the Equalisation Levy in the context of global digital taxation frameworks. What challenges may arise from this shift, and what measures should India adopt to ensure revenue stability?
Kartavya Desk Staff
Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment
Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment
Q5. Evaluate the significance of India’s decision to abolish the Equalisation Levy in the context of global digital taxation frameworks. What challenges may arise from this shift, and what measures should India adopt to ensure revenue stability? (15 M)
Difficulty Level: Medium
Reference: TH
Why the Question? The government proposed to abolish the Equalisation Levy or digital tax on online advertisements as part of the 59 amendments to the Finance Bill 2025. Key Demand of the Question The question requires examining the significance of abolishing the Equalisation Levy, the challenges arising from this decision, and proposing strategies to maintain India’s tax revenue. Structure of the Answer Introduction: Briefly introduce the Equalisation Levy’s purpose, its role in India’s tax framework, and the reason behind its removal. Body: Significance of Abolishing Equalisation Levy: Discuss how the move aligns India with OECD norms, reduces trade tensions, and promotes investment. Challenges Posed by the Decision: Highlight risks like revenue loss, tax evasion, and regulatory voids. Measures to Ensure Revenue Stability: Suggest steps such as enhancing GST on digital services, strengthening TDS mechanisms, and expediting OECD framework adoption. Conclusion: Conclude by emphasizing the need for India to adopt a balanced approach that aligns with global tax reforms while safeguarding its digital tax base.
Why the Question?
The government proposed to abolish the Equalisation Levy or digital tax on online advertisements as part of the 59 amendments to the Finance Bill 2025.
Key Demand of the Question
The question requires examining the significance of abolishing the Equalisation Levy, the challenges arising from this decision, and proposing strategies to maintain India’s tax revenue.
Structure of the Answer
Introduction: Briefly introduce the Equalisation Levy’s purpose, its role in India’s tax framework, and the reason behind its removal.
• Significance of Abolishing Equalisation Levy: Discuss how the move aligns India with OECD norms, reduces trade tensions, and promotes investment.
• Challenges Posed by the Decision: Highlight risks like revenue loss, tax evasion, and regulatory voids.
• Measures to Ensure Revenue Stability: Suggest steps such as enhancing GST on digital services, strengthening TDS mechanisms, and expediting OECD framework adoption.
Conclusion: Conclude by emphasizing the need for India to adopt a balanced approach that aligns with global tax reforms while safeguarding its digital tax base.