Chancellor Rishi Sunak has announced the 20% tax on e-books and online newspapers, magazines and journals will be abolished on 1 December.
The Publishers' Association had called it "unfair and illogical".
And a letter calling for it to be axed was signed by more than 600 authors and presented to Parliament in October.
Physical books and periodicals are already exempt - and the EU let member states drop sales taxes on electronic publications back in October 2018.
"The government expects the publishing industry, including e-booksellers, to pass on the benefit of this relief to consumers," the Budget states.
Publisher 404 Ink tweeted the "huge" decision would allow it to sell e-books from its website again.
It is unclear whether it will also apply to audiobooks, which were not specifically mentioned in the chancellor's speech. The Royal National Institute of Blind People (RNIB) told BBC News it was "seeking clarity" and BBC News has asked the Treasury.
Jim Waterson, media editor at the Guardian newspaper, estimated the move could benefit News UK - publisher of the Sun and Times papers - by £20m, if it kept the cost to consumers the same rather than passing on the saving to subscribers.
A 2018 report by the Publishers' Association estimated universities, libraries, government departments and the NHS would save up to £55m a year as a result of ditching VAT on digital publications.