Apple's bid to manufacture iPhones in India comes with a request for heavy tax exemptions

By Karthekayan Iyer | Published on 20 Jan 2017

Apple wants to start assembling iPhones in India but has sought tax exemptions and benefits from the government

Apple's bid to manufacture iPhones in India comes with a request for heavy tax exemptions

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Apple wants to start assembling its iPhones in India but the company is seeking heavy concessions from the Indian government for the same. As per reports, Apple had been asking the Indian government to wave off the local sourcing norms for setting up its retail stores here and now it is asking for financial concessions as well.

Apple is scheduled to meet government officials next week and Bloomberg reports that the Cupertino-based iPhone maker is asking for a 15-year tax exemption on imports of components and other equipments. Apple iPhone sales are slowing down in China and the United States, two big markets for the company. In order to continue growth, Apple wants to boost its business in India, the second largest smartphone market in the world.

"We would like Apple to set up base in India," Ravi Shankar Prasad, Union Minister for Information Technology said on Wednesday, without disclosing the company's negotiating stance.

The Indian government has already relaxed its rules for setting up single-brand retail stores in India. The single-brand retail store setup demands 30 percent local sourcing in India. With the relaxed norms, technology companies can operate their stores for three years before meeting that requirement. However, Apple wants more than relaxation with norms. According to Indian Express, Apple is demanding full exemption from duties on manufacturing and repair inputs including components and capital equipment.

Apple doesn't manufacture devices on its own but rather contracts them to Foxconn and Pegatron. Apple is considering partnering with Taiwan's Wistron Corp. for manufacturing iPhones in India, notes Bloomberg. Wistron has an assembly unit in Bangalore where iPhones could be assembled initially before adding suppliers including Foxconn to fulfill demands. Apple CEO Tim Cook met Prime Minister Narendra Modi during his visit in May to discuss company's prospects in India. Apple officials have met government sources several times in the past to discuss its plans to setup retail stores and a manufacturing unit in India. Apple's market share in the past dipped below 2 percent in India. The company enjoys significant success in the premium smartphone category, but that space enjoys very niche market share. By agreeing to Apple's demands, India will be forced to offer similar benefits to other brands like Xiaomi and Samsung.

Apple executives are scheduled to meet government officials on January 25 where the company is expected to push for relaxation on local sourcing and import duties.

Karthekayan Iyer

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