Question 1

The government increased the Equalisation Levy to capture more revenue from tech giants like Google and Meta.

Accepted Answer

The Finance Bill 2025 actually abolished the 6% Equalisation Levy entirely, effective April 1, 2025.

Question 2

Both the 2% e-commerce tax and the 6% digital ad tax were abolished together in March 2025.

Accepted Answer

The 2% levy on e-commerce transactions was already abolished earlier, taking effect on August 1, 2024. The March 2025 amendments specifically eliminated the older 6% levy on online advertising.

Question 3

Consider the following statements regarding the Finance Bill 2025 and digital taxation in India:
1. The 6% Equalisation Levy abolished in 2025 was originally introduced through the Finance Act of 2016.
2. The Finance Bill 2025 removes the words 'or indirectly' from Section 9A of the Income Tax Act to ease the safe harbour compliance for eligible offshore funds.
3. As a Money Bill under Article 110 of the Constitution, the Finance Bill requires the mandatory approval of the Rajya Sabha within 6 months.
How many of the above statements are correct?

Accepted Answer

(b) Only two — Statement 1 is correct; the 6% Equalisation Levy on digital ads was introduced in 2016. Statement 2 is correct; the amendment to Section 9A(3)(c) relaxes the 5% domestic investment threshold condition by removing 'or indirectly'. Statement 3 is incorrect; the Finance Bill is a Money Bill (Article 110), meaning the Rajya Sabha can only make recommendations within 14 days, and its approval is not mandatory.

Question 4

Match List I (Provision/Framework) with List II (Subject Matter):

List I:
A. Article 110 of the Constitution
B. Section 163 of the Finance Act 2016
C. Section 9A of the Income Tax Act
D. OECD BEPS Pillar Two

List II:
1. Safe harbour regime for offshore investment funds
2. Introduction of the 6% Equalisation Levy
3. Global minimum corporate tax rate of 15%
4. Provisions strictly related to taxation, borrowing, or consolidated fund

Accepted Answer

(a) A-4, B-2, C-1, D-3 — Article 110 defines a Money Bill (4). Section 163 of the Finance Act 2016 introduced the 6% Equalisation Levy (2). Section 9A of the IT Act provides the safe harbour for eligible investment funds (1). OECD BEPS Pillar Two proposes a global minimum corporate tax rate of 15% (3). Option (a) is the only correct matching.

Question 5

Assertion (A): The Government of India completely abolished the 6% Equalisation Levy on foreign digital companies via the Finance Bill 2025.
Reason (R): India aimed to avoid retaliatory Section 301 trade tariffs from the United States and align its domestic tax policies with the OECD/G20 Inclusive Framework.
Select the correct answer:

Accepted Answer

(a) Both A and R are true, and R is the correct explanation of A. — The abolition of the 6% Equalisation Levy (Assertion A) was executed directly to mitigate diplomatic and trade tensions, particularly the threat of reciprocal tariffs by the US Trade Representative (USTR) under Section 301, and to fulfill commitments to the global multilateral tax consensus (Reason R). Thus, R is true and correctly explains A.

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