Post the meeting of Apple CEO Tim Cook and PM Narendra Modi last year, the Cupertino giant is keen on expanding its operations in the country. Just yesterday, reports revealed company’s meeting with the Indian government officials to seek permission to set up an iPhone production plant in Bangalore. The factory is said to be built in alliance with Wistron, a Taiwan- based manufacturer. But as of today, a new hindrance has surged up which might cause a delay in Apple’s plan.
With the country moving towards a centralized taxation system, Apple may also need the support of states. Apple’s plans for tax incentives, including long-term duty exemptions are to be integrated with the country’s to-be-implied goods and services tax (GST). The company’s major demands include predictability and certainty of countervailing duty (CVD) exemption.
To explain further, Countervailing duties in the U.S. determines whether imports in question are being subsidized and, if so, by how much. Hence, the imports will now be levied with integrated GST in place of countervailing duty for Apple. The GST implied on the products will encompass all central taxes including central excise duty, services tax, countervailing duty, state taxes, value-added tax, octroi and purchase tax. This is a result of the review of entire incentives policy for manufacturers by the Indian government.
A government official aware of the matter further added,
Exemptions under the GST regime will have to be decided by the GST Council.
A separate team has been appointed under the supervision of GST Council to determine goods to be exempted and goods to be levied with taxes. Further, the team will rely on committee’s recommendations before the final decision is out.
For exemption of tax duties, the centre will have to convince states. Though this would be hard to achieve this task but it will help boost the ‘Make in India’ initiative to its next level. Post the in-house manufacturing facilities are set up, the decision might not affect Apple much. The government is keen on attracting high-profile companies to set up plants in India similar to Apple, which has a massive production setup in China.
Apple has made much progress on the mentioned issue, as the tech giant has already sought government’s assurance on continuing the CVD exemption for 15 years. Moreover, the government has also provided certain relaxations including the allowance of second-hand capital goods imports of up to 20 percent of total investment under modified special incentive package scheme (M-SIPS).
Though mobile phone components bypass the basic customs duty, under the WTO Information Technology Agreement, India recently brought three items back into its list for 12.5 percent CVD. This was done as to retain companies’ manufacturing facilities in the country. Apple is concerned over the expansion of list in future and demands a complete assurance on same. The official further added,
They want predictability and certainty in tax regime as any mid-term tax shock can topple all their financial calculations.
The government says that if it allowed Apple to bypass any laws, it might have to allow all other device and component manufacturers. Apple further obliges change in the label as manufacturing and labelling provisions under the Indian Metrology Act. The government officials responded as,
Their demands would be examined by the departments and then they will respond.
There are many expectations tied up with Apple’s coming to India. It is also speculated that the country might overtake the United States as the world’s second largest smartphone in 2017. Let’s hope it happens just soon!