India is considering extending a significant tax exemption for foreign companies that supply machinery and equipment to contract manufacturers within the country. This move could have substantial implications for tech giants like Apple, which have been expanding their manufacturing footprint in India.
The proposed amendment aims to prolong the current tax break, initially set to expire in 2031, by an additional decade, extending it to 2041. This exemption ensures that foreign entities do not incur Indian income tax liabilities solely due to ownership of equipment utilized by local contract manufacturers.
The extended tax relief would apply to manufacturers of various electronic devices, including mobile phones, tablets, laptops, hearing aids, and wearable electronics. However, the benefits are specifically designed for factories and warehouses located in customs-bonded areas, which are considered outside India’s customs jurisdiction. Products sold domestically from these facilities would still be subject to import taxes, making such setups primarily advantageous for export-oriented operations.
Apple has been a significant proponent of this tax exemption. Earlier this year, the company successfully lobbied the Indian government for the initial tax relief, which was slated to last until 2031. The potential extension to 2041 would further bolster Apple’s manufacturing strategy in India.
In recent developments, India has also removed import duties of 5% and 7.5% on several components essential for smartphone and electronic device manufacturing. This policy change aligns with India’s broader objective to position itself as a global electronics manufacturing hub and to attract multinational corporations seeking to diversify their supply chains.
According to data from Counterpoint Research, India is projected to produce 26% of the world’s iPhones by 2026, a significant increase from 6% four years prior. This growth underscores India’s rising prominence in the global electronics manufacturing landscape.
Extending the tax exemption to 2041 would provide long-term stability and incentives for companies like Apple to deepen their manufacturing investments in India. This move not only strengthens India’s position as a key player in the global electronics supply chain but also aligns with the country’s ambitions to become a major manufacturing hub. For Apple, it offers a strategic opportunity to reduce dependency on other manufacturing bases and to tap into India’s growing market and skilled workforce.
