Until it is clear whether, and how, the domestic tax incentives will be accommodated in the forthcoming goods and services tax (GST) regime, the goverment won’t take a call on US tech giant Apple’s wish-list in the context of its plan to set up an iPhone/iPad manufacturing unit in India, reports fe Bureau in New Delhi.
Ministry of electronics and IT secretary Aruna Sundarajan on Friday said a decision on incentives to Apple can be taken only after tax rates under GST are finalised.
“GST is still evolving. See, what they (Apple) are asking for is, make it profitable for us to manufacture here and therefore give us a favourable duty regime. Exactly how favourable it should be is something that needs to be ironed out. But the first thing is what will be the manner in which this would be reflected in the new GST regime, (firmed up by) the GST Council,” Sundarajan said.
Sundarajan added: “So only once the council decides how the existing trade regime is going to get translated into the new one and how domestic manufacturing incentives are going to get reflected in GST can a decision on Apple’s demands can be taken.”
Most existing indirect taxes including excise duty, state value-added tax, service tax and countervailing duties on imports will be subsumed in GST.
Most tax exemptions are set to be abolished in the GST regime.
On Apple’s demands regarding making refurbished iPhones in India, the secretary said: “As long as they are exporting (it could be allowed)… They have asked for exports.”
As part of its preconditions to manufacture in India, Apple had earlier told the government it wants to use its manufacturing unit here (when it has one) to also export “certified pre-owned iPhones”, apart from making new devices. The environment ministry is considering the proposal. The iPhone maker plans to set up only a “pilot project” near Bengaluru initially, and the extent of manufacturing there hinges on the kind of concessions the central government is willing to offer the tech giant.
Apple, which has expressed interest in setting up manufacturing facilities in India, has reportedly sought several sops from the government, including a 15-year customs duty holiday on imports of iPhone kits, new and used capital equipment, and consumables.
The California-based tech giant also wants duty cuts on components — completely knocked down (CKD) and semi-knocked down (SKD) units of iPhones — for re-assembly at the finished goods manufacturing line. It has also demanded a relaxation of the 30% local sourcing requirement under the foreign direct investment (FDI) rules.
So far, Apple has not committed anything on investment or prospects of manufacturing and job creation to the central government.
India, one of the fastest growing smartphone markets in the world, has emerged as a key revenue churner for Apple. According to the latest data from Counterpoint Research, Apple achieved a landmark, crossing 2.5 million smartphones in a calendar year, with a one-third of its total shipment coming from the record fourth quarter in 2016 alone, driven by seasonality and the launch of the iPhone 7. The company captured the 10th position in the Indian smartphone rankings during the fourth quarter of 2016 but led the premium segment (above $450) with a 62% market share.