Digital Inclusion vs. Fiscal Revenue Assessing India's Per-Gigabyte Data Tax

Abstract

India has reportedly submitted a study proposal to its DoT which has the potential to change the digital landscape of the country. The proposal is to impose a one rupee charge on each gigabyte of mobile Internet data used, and the aim is to discourage the youth from consuming data that is not productive and to reduce their addiction to social media. The proposal seems modest and could generate just under three billion dollars in new annual revenues, but it would increase the average user's mobile bill by 10 to 15 per cent. However, beneath this seemingly simple proposal lie a range of technical, economic, philosophical, and constitutional issues. This article aims to critically analyse the proposal and place it in the context of the ongoing digital transformation in India and the international discourse on the taxation of the Internet economy. It assesses the rationale of nudging users to behave in a certain way, the inability to distinguish between productive and unproductive data flows, the regressive consequences for lower-income users, and macroeconomic risks for sectors relying on low-cost connectivity. The article also refers to the experiences of other countries, such as Uganda and Hungary, to illustrate that the internet usage tax has consistently failed. Finally, it suggests alternative policy frameworks that will mitigate the concerns while maintaining digital inclusion, innovation and fundamental rights.