A familiar number, a different set of capitals
On July 23, 2026, the Computer & Communications Industry Association released a report finding that digital services taxes (DSTs) in the UK, France, Italy, Spain and Austria pulled roughly $3.6 billion from U.S. tech platforms in 2025 alone — a 20% jump from 2024 and part of a $13 billion-plus haul since these taxes began in 2020. CCIA Vice President Jonathan McHale summed up the trend line bluntly: DSTs are "not a plateau, they are a ramp," and he urged Washington to use its Section 301 trade authority against the five governments still collecting.
India isn't on that list anymore. It used to be.
India already ran this exact playbook
In January 2021, the U.S. Trade Representative found India's DST — a 2% levy on non-resident e-commerce operators, layered onto a pre-existing 6% levy on foreign digital advertising — "unreasonable or discriminatory," and threatened 25% tariffs on Indian goods. Rather than let that fight run its course, India negotiated a transitional truce: it agreed to credit collected DST against future taxes owed once the OECD's Pillar One global tax deal took effect, and the U.S. suspended its tariffs. USTR terminated the Section 301 action in November 2021 on that basis.
Pillar One has still not entered into force five years later — the same slow-motion multilateralism that left the UK, France, Italy, Spain and Austria collecting DST revenue through 2025 while everyone waited. India didn't wait. Facing renewed pressure — including President Trump's August 2025 threat of blanket tariffs on any country taxing U.S. digital firms — India withdrew the 2% e-commerce levy in August 2024 and eliminated the 6% ad levy entirely from April 1, 2025, forgoing an estimated $400 million in annual revenue, according to Tech Policy Press's account of the withdrawal.
The steelman for DSTs, and why it still falls short
The case for taxes like these is not frivolous. Large digital platforms generate substantial value from users and advertisers in markets where they book little or no taxable profit, because corporate tax law still largely keys off physical presence — a rule written for factories, not app stores. The OECD's own Pillar One process exists precisely because 15-plus countries concluded unilateral DSTs, however imperfect, were the only lever available while multilateral reform crawled through a decade of negotiation. Governments under fiscal pressure reasonably asked why platforms should pay less, proportionally, than the local newspaper they displaced.
But a DST that targets a handful of large, mostly American platforms by design — not by neutral criteria — is a tariff wearing a tax code, and it invites the response tariffs get: retaliation. CCIA's report is itself evidence of the mechanism working as feared: five governments extracting a rising, discriminatory toll, and the affected industry now formally requesting the U.S. government escalate. That escalation, if it comes, lands as new tariffs on European exporters who have nothing to do with digital taxation — a second-order cost DST-adopting governments rarely price in when they pass these levies.
Why this still matters for India
India's repeal looks, in hindsight, like the cheaper outcome — a few hundred million dollars in foregone revenue against the risk of a tariff war layered on top of the broader US-India trade negotiations that produced the interim tariff-cut deal earlier this year. But the underlying policy question India was trying to answer with its equalisation levy hasn't gone away, and India has already legislated a successor. The new Income Tax Act, 2025 introduces a "Significant Economic Presence" test effective April 1, 2026, taxing non-resident digital firms once their transactions with, or systematic engagement of, Indian users crosses a government-prescribed threshold — a nexus rule that reaches much the same target as the repealed levy, even if its mechanics and defenders' framing differ.
That distinction — a general nexus rule for computing taxable presence versus a named tax that singles out a handful of foreign platforms — is exactly the line USTR drew in 2021 when it distinguished acceptable tax policy from an actionable Section 301 target. Whether SEP survives that test in practice will depend on how narrowly or broadly its still-unnotified thresholds end up being drawn, and whether enforcement in practice concentrates on the same handful of large U.S. platforms the equalisation levy did.
The better fix is the one still stalled
The CCIA report is a reminder that unilateral digital taxation, wherever it's tried, tends to produce the same cycle: revenue rises, industry lobbies for retaliation, and governments eventually trade the tax away in exchange for tariff relief — India's own experience in miniature. The more durable fix is the one the OECD has spent a decade failing to finish. Until Pillar One is actually implemented, expect more capitals to test DST-shaped instruments, and expect Washington to keep reaching for Section 301 each time. India's position — tax repealed, SEP rules incoming, trade talks with Washington ongoing — puts it closer than most jurisdictions to finding out which side of that line its new nexus rule falls on.