The department of telecommunications (DoT) is unlikely to go ahead with a proposal to tax mobile data usage, with technical challenges in implementing such a levy and concerns over its impact on data consumption emerging as key reasons for shelving the idea, according to officials aware of the matter.
The proposal had been taken up after a review of the telecom sector chaired by Prime Minister Narendra Modi in January. DoT was asked to examine whether data usage could be taxed to generate additional revenue and work out a model that could encourage the use of data for productive activities while discouraging consumption that could contribute to digital addiction, particularly among children.
However, officials now believe that implementing such a tax would not be feasible at present. “We believe it will not be feasible to implement this at the moment,” an official said.
The department had been asked to work out a model by September 30. The latest assessment effectively puts the proposal on course to be dropped.
A key challenge is determining how a levy should be applied to data usage. A tax based on actual consumption would require monitoring data usage at a granular level, while taxing the data bundled into mobile plans could increase the cost of connectivity for users irrespective of their actual consumption.
The proposal also faces a policy challenge as mobile data has become an essential part of everyday economic activity, including digital payments, education, healthcare and online commerce. A blanket levy could therefore affect productive and non-productive consumption alike.
Mobile data usage stood at 285 billion GB in FY26, up 24.5% from 229 billion GB in FY25, according to DoT data. At the earlier-discussed rate of Rs1 per GB, the levy could potentially have generated thousands of crores in additional revenue, but the growing dependence on mobile Internet also raises concerns over the impact of making data more expensive.
The original proposal was also linked to concerns over excessive screen time and digital addiction among children. However, officials said there were other policy interventions that could address the issue without imposing a tax on data consumption.
Technology analysts had earlier pointed to measures such as age verification, parental controls and restrictions on certain categories of online content as more targeted ways of addressing excessive digital consumption.
The government’s decision to reconsider the proposal also comes against the backdrop of rising data consumption and the widespread availability of low-cost mobile data. Consumers already pay 18% GST on mobile recharges and telecom services.
The proposal had therefore faced questions over whether a separate data-use levy would discourage Internet adoption and run counter to the broader push towards greater digitalisation.