Prime Minister Narendra Modi's government said the measure was meant to help stop the spread of misinformation throughout the country, but critics swiftly condemned it as an attack on free speech in the world's most populous democracy.
A spokesman for Modi's office confirmed the Indian leader ordered the rule be pulled.
Smriti Irani, India's minister of information and broadcasting, said Tuesday the now-removed order had generated debate and that media organizations could work with the government to fight what she called "the menace of 'fake news.' "
The measure's introduction was troubling to some who saw it as the latest effort among powerful leaders of Asian democracies to target the free press under the guise of combating so-called fake news, a term popularized by President Donald Trump in his effort to fight negative press coverage.
India appears to be following a similar path, said Prem Panicker, a prominent journalist who used to be Yahoo India's managing editor
"There is a worldwide leaning toward hard-right governing style and hard-right leaders, and the corollary to that is that there's increasing stresses on the press," Panicker told CNN.
"The single biggest problem is that this is when you want a very free, very vibrant press."
Despite the fierce criticism of New Delhi's proposed rule, some of its opponents do believe there's a need for either more regulation or greater responsibility on the part of publishers.
India has one of the world's most saturated and fastest-growing media markets, boasting thousands of options in print, television and online journalism.
With that freedom and booming market has come a thriving tabloid culture, which has frustrated mainstream journalists who get lumped in with those peddling misinformation and flouting common standards.
Ahmed Patel, a senior leader of the opposition Indian National Congress political party, said that he appreciated the effort to combat "fake news" but voiced concerns that the proposed measure could be misused.
Others, such as Gupta at ThePrint, said India's respected outlets have not done enough to stymie the growth of increasingly sensationalist tendencies in the press.
CNN's Marc Lourdes and Euan McKirdy contributed to this report.