Equalisation Levy 2.0: Status Post-Pillar One/Two Implementation
The short answer: Equalisation Levy 2.0 is no longer a live tax in India. The 2% levy on e-commerce supply or services ended for consideration received or receivable on or after 1 August 2024. The remaining 6% online-advertising levy was withdrawn from 1 April 2025.
Why this matters
For several years, Equalisation Levy was India’s direct response to the challenge of taxing digital businesses that earned from Indian customers without maintaining a conventional physical presence in India. It affected overseas e-commerce operators, digital marketplaces, advertising platforms and Indian businesses making payments to non-resident service providers.
Today, the levy has moved from a current tax cost to a historical compliance issue. Businesses must still review past transactions, but should not treat the levy as applicable to new transactions after the withdrawal dates.
What was Equalisation Levy 2.0?
India introduced its first Equalisation Levy in 2016. It was a 6% levy on certain online advertising services provided by non-residents.
In 2020, the scope was expanded through a 2% levy on e-commerce supply or services. This expanded framework became popularly known as Equalisation Levy 2.0.
It could apply where a non-resident e-commerce operator sold goods, provided services or facilitated online transactions connected with India. The rules were broad enough to cover digital marketplaces, online sale of goods, online service platforms and certain transactions involving Indian customers or Indian internet protocol addresses.
In essence: Equalisation Levy 2.0 was India’s digital-tax mechanism for certain cross-border e-commerce income.
⏳ When did the 2% levy end?
The Finance (No. 2) Act, 2024 introduced a sunset provision for the 2% Equalisation Levy. It does not apply to consideration received or receivable for e-commerce supply or services on or after 1 August 2024.
This means that businesses should not apply the 2% levy to transactions falling after that date. However, transactions from earlier periods may still be subject to review, assessment, interest, penalty or litigation.
The date of the transaction, the contractual right to receive payment, invoice timing and payment terms can all matter when analysing historical exposure.
What happened to the 6% levy?
The original 6% Equalisation Levy on specified online advertising services was withdrawn from 1 April 2025.
With this step, India effectively phased out both forms of Equalisation Levy. The 2% e-commerce levy ended first, followed by the 6% digital-advertising levy.
Current position: Equalisation Levy provisions are not applicable from Assessment Year 2026–27 onward.
The connection with Pillar One
Pillar One is part of the OECD/G20 Inclusive Framework’s two-pillar approach to international tax reform. It aims to change how taxing rights are allocated where very large and highly profitable multinational groups earn income from market jurisdictions.
Its key component, known as Amount A, is intended to reallocate a portion of residual profits to countries where customers and users are located.
For India, this matters because large multinational groups can generate substantial value from Indian consumers without having a traditional physical presence in the country. Pillar One is designed to provide a coordinated international framework for addressing that issue.
Important clarification: Pillar One has not yet achieved complete global implementation. It would therefore be incorrect to say it has fully replaced Equalisation Levy 2.0.
How is Pillar Two different?
Pillar Two has a different purpose. It seeks to ensure that large multinational groups pay a minimum effective tax rate of 15% in every jurisdiction where they operate.
It is generally relevant to multinational groups with consolidated annual revenue of at least €750 million. The framework includes mechanisms such as the Income Inclusion Rule, the Undertaxed Profits Rule and the Qualified Domestic Minimum Top-up Tax.
Unlike Equalisation Levy, Pillar Two is not limited to digital businesses or market-linked e-commerce transactions. It is a global minimum-tax framework intended to reduce profit shifting and low-tax outcomes.
🇮🇳 India’s position today
India remains part of the OECD/G20 Inclusive Framework and continues to engage with global tax reform. But India has not enacted domestic Pillar Two charging rules such as an Income Inclusion Rule, Undertaxed Profits Rule or Qualified Domestic Minimum Top-up Tax.
This does not mean that Indian multinational groups can ignore Pillar Two. A group with operations in countries that have implemented Pillar Two rules may still face overseas reporting, data-collection or top-up-tax obligations.
Foreign multinational groups with Indian operations should similarly assess their global structure, including the tax rules applicable in the jurisdiction of their parent company or intermediate holding company.
What should businesses do now?
Businesses should review historical Equalisation Levy exposure for periods before the withdrawal dates. They should confirm whether relevant transactions were identified correctly, levy was deposited where required, statements were filed and documentary support is available.
They should also update payment workflows, vendor questionnaires, contracts, tax clauses and accounting systems. References to Equalisation Levy may remain in legacy processes even though the levy is no longer applicable to current transactions.
Large multinational groups should maintain a separate Pillar Two readiness review. Their exposure may arise outside India, especially where group entities operate in jurisdictions that have already enacted global minimum-tax rules.
A common misconception
“India withdrew Equalisation Levy because Pillar One and Pillar Two are fully in force.”
That is not the present legal position. Equalisation Levy has been withdrawn, but Pillar One is still awaiting complete global implementation and India has not enacted domestic Pillar Two rules.
The better view is that India’s domestic digital-tax framework has changed while international tax reform continues to evolve.
Final takeaway
Equalisation Levy 2.0 is no longer a current levy in India. The 2% e-commerce levy ended from 1 August 2024, and the 6% online-advertising levy ended from 1 April 2025.
Businesses should now focus on historical compliance, ordinary income-tax and treaty rules, transfer pricing, and potential Pillar Two exposure in other jurisdictions. The global tax landscape is still changing, so multinational groups should continue tracking developments closely.
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Anuj Kumar is a Manager at TAXAJ's Bangalore office, working within the Accounts & Taxation team. With over six years of industry experience, Anuj advises businesses on accounting, taxation and regulatory compliance. TAXAJ is a multi-disciplinary consulting firm spanning finance, taxation, legal, secretarial, FEMA and IPR, with offices in Delhi, Bihar, Bangalore and Goa.
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