Apple, India in deadlock on tax

THE DISAGREEMENT could be a stumbling block, and risks delaying Apple’s plans to penetrate the Indian market. DESPITE A boom in smartphone sales, Apple’s market share is only 2%.

New Delhi, Dec. 11: Apple has asked India to defer a planned increase in import taxes on mobile phone parts so it can expand its iPhone manufacturing in the country, but the government is unlikely to accede, people familiar with the matter said.

The tech giant has been in talks with officials for months, seeking “pre-requisites” — government tax breaks and incentives — for expanding its operations in one of the world’s fastest-growing smartphone markets.

During those talks, Apple has conveyed it wants India to defer an existing policy that plans to levy taxes on more imported mobile components in line with the “Make in India” drive to boost domestic manufacturing.

While India’s government has been keen to get Apple to manufacture in India as a showpiece investment, it has told the US firm there would be no policy exemptions, so there will be no tax breaks on parts imports, the people said. “Apple wants duty-free imports of components. India wants indigenisation,” said one person.

Apple has expressed willingness to increase local value addition over time, but has stuck to its demand for immediate import tax relief to expand its iPhone manufacturing, the person added.

Apple declined to comment, and there was no response from either Modi’s office or the ministry of electronics and IT, which is trying to help build an electronics manufacturing base.

The disagreement could be a stumbling block, and risks delaying Apple’s plans to penetrate the Indian market, where it currently just assembles its iPhone SE model.

Despite a boom in smartphone sales, Apple’s market share in India is only around 2 per cent.

Apple has demanded the tax relief as India still lacks an ideal ecosystem for parts makers to thrive.

Counterpoint Research data shows about 90 per cent of $14 billion worth of mobile components are imported. — Reuters