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India teases tax breaks for Apple if it delivers job creation

India teases tax breaks for Apple if it delivers job creation

The government of India has requested more details from Apple about the US firm’s long-term investment plans for the country before it considers offering the company any tax concessions.

The firm has held discussions with Indian officials about the expansion of its production in the country, with the government keen to know how many jobs Apple expects its operations will create. If Apple’s investment plans are shown to increase local value addition within a specific timeframe then the firm could be granted permission to import components tax-free.

Apple had requested tax breaks – specifically a 15-year waiver for customs duties on importing components and exemption from India’s 30% local sourcing rule – as a condition for beginning production in India. While it was denied these concessions by the country’s Department of Revenue in March, the vendor had in February reached a deal to begin production of its iPhone SE model in India.

Manufacturing of the iPhone SE handsets recently commenced at a dedicated facility in Bengaluru (Bangalore), with an initial run of between 25,000 and 50,000 devices a month. Apple has respected requirements to source local components and implement local content, in line with the government’s Make in India initiative.

Although Apple’s request for tax breaks was shot down on the grounds that the authorities would not concede to the demands of one company, the government is keen to bring in foreign investors. It is in the process of re-evaluating its manufacturing policy to encourage overseas investment, but also to support the Make in India initiative being heavily promoted by Prime Minster Narendra Modi’s government.

India is the world’s second largest smartphone market, and growth is slowing in China (currently the largest). This has prompted Apple to look towards India for rapid smartphone growth. Overall smartphone shipments in the country hit 27 million units in the first quarter of 2017, a year-on-year increase of 14.8%.

Apple’s key rival Samsung has announced that it plans to double its Indian manufacturing with a KRW700 billion ($623 million) investment.