Apple’s India tax break request declined, for now

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Apple’s demand for tax concessions for local iPhone production has “not been accepted” by India’s Finance Ministry and the matter may now be decided by a council responsible for the implementation of the country’s new indirect taxation regime.

Apple, manufacturing, tax, GST, India

A goods and services tax subsuming over a dozen central and state government levies is expected to be implemented from July 1. Under the GST regime, all imports will be liable to the new unified sales tax and “any tax exemptions can be granted based on the recommendations of the GST council only,” P.P. Chaudhary, junior minister for electronics and information technology, informed Parliament.

The minister’s remarks suggest that the ball is now in the court of the GST Council – which comprises representatives from the country’s central and state governments – for any action regarding Apple’s request.

Apple has sought duty exemption on “manufacturing and repair units, components, capital equipment (including parts) and consumables for a period of 15 years,” Chaudhary said in a written response to Parliament earlier this month. He said Apple’s requests were examined “in the Department of Revenue [of the Finance Ministry] and have not been accepted.”

All existing exemption to manufacturers from excise and countervailing duties will also be reviewed by the GST Council, he added.

Separately, Commerce and Industry Minister Nirmala Sitharaman said that Apple, in its communications to the government, has indicated its plan for “selective introduction of manufacturing lines in spring 2017.”

Analysts also see huge potential for Apple to grow in India, the world’s second largest smartphone market, with or without tax breaks for local manufacturing. The company holds a market share of just 2 per cent in the country of 1.25 billion, where it is increasingly focusing due to a slowdown in China and the U.S – the largest and third largest smartphone markets in the world. respectively.

More than 40 companies, including South Korea’s Samsung and China’s Xiaomi, have established manufacturing facilities in India, none of which have sought any extra incentives.

At present, the Indian government provides support to manufacturers under its Modified Special Incentive Package Scheme to boost electronics manufacturing. The MSIPS promotes large-scale manufacturing in the electronic system design and manufacturing sector by providing subsidies of up to 25 per cent for capital expenditure.

By Baishakhi Dutta

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