Apple and other multinational electronics businesses are likely to reap the benefits of India’s plan to extend tax breaks for foreign corporations that sell machinery and equipment to contract manufacturers until 2041. To encourage investments in export-oriented industry and provide long-term policy certainty, the idea is part of draft tax reforms.
This year’s Union Budget granted tax relief to foreign enterprises by removing their tax duties on equipment provided to contract manufacturers in customs-bonded zones. The proposed modifications would expand on this relief. The initial exemption lasted until the year 2031.
Electronics Manufacturers Get a Huge Relief
Because Apple had fought to have its ownership of high-end manufacturing equipment utilised by its contract manufacturers exempted from taxation in India, the extension is very important to the company. The business claimed that the current regulations might put it at risk of tax liabilities and make its future growth ambitions in India more difficult to implement.
As Apple expands its manufacturing footprint beyond China, India has become an important base of operations. Counterpoint Research predicts that by 2026, India will have produced approximately 26% of the world’s iPhones, a significant increase from 6% four years earlier.
Mobile phone, tablet, laptop, wearable, and hearing aid manufacturers would be eligible for the proposed tax exemption. Additionally, the government has suggested a reduction in taxes for foreign enterprises who store and provide components required in the production of these goods within zones that are subject to customs bonds.
According to experts in the field, these steps could help businesses better manage risks in their supply chains and increase operational flexibility. By luring international companies to set up shop in India as suppliers of equipment and components, the changes should also help boost exports.
