Shafaqna Pakistan: India has proposed extending tax exemptions until 2041 for foreign companies that supply machinery to contract manufacturers, a move expected to benefit Apple, which has been lobbying for the policy as it rapidly expands its manufacturing footprint in the country.
The South Asian nation has become a key production hub for Apple as the company diversifies iPhone manufacturing beyond China. According to Counterpoint Research, India is projected to produce 26% of the world’s iPhones in 2026, up from just 6% four years earlier.
A draft of the proposed tax amendments, reviewed by Reuters, states that the government plans to extend the tax relief until March 31, 2041, to provide greater certainty for foreign companies that supply manufacturing equipment to their contract manufacturers in India.
The tax exemption was initially introduced in February and was set to remain in force until 2031. The move followed Apple’s lobbying efforts to amend India’s income tax rules so the company would not face taxation for owning the advanced iPhone manufacturing equipment it provides to its contract manufacturing partners.
Apple had feared that, unlike in China, tax laws in India could treat ownership of machinery supplied to its contract manufacturers as so-called “business connection”, exposing its iPhone profits to tax.
Tax break for storing components
The extended tax exemption will apply to manufacturers of mobile phones, tablets, laptops, hearing and wearable electronic devices, according to the draft bill that will have to be passed by the lower and upper houses of parliament.
India has also exempted from tax foreign companies’ income from storing and providing parts used to manufacture such electronics components to contract manufacturers until 2041.
The rule will apply for factories and warehouses set up in so-called customs-bonded areas – which are technically considered being outside India’s customs border. If devices are sold within India from such factories, they will attract import taxes, making such facilities attractive only for exports.
“The proposed tax changes will enable foreign companies to store and transfer critical equipment and components in India for their contract manufacturers, helping mitigate supply chain disruptions arising from trade uncertainties while providing greater tax certainty,” said Riaz Thingna, a partner at Grant Thornton Bharat.
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Data centers
India has also proposed to make it easier for foreign companies that use data center services in the country to make use of tax exemptions.
India in February announced a tax exemption until 2047 for foreign companies using data centers in the country to provide services to global clients, addressing concerns that New Delhi could in future tax their global income for using such facilities.
The bill now allows data centers to be leased, rather than be owned by the Indian partners of foreign companies.
Allowing Indian partners to lease, rather than own, data centers will lower capital requirements and make it easier for smaller and mid-sized players to enter the market, said Thingna from Grant Thornton Bharat.
Separately, India has also proposed a 15-year tax exemption for foreign diamond miners and traders that sell rough diamonds through designated trading zones in the country. India is already the world’s largest diamond-cutting and polishing centre.
Source: Express Tribune
