Apple and India wrangle over import tax in manufacturing deal

(Reuters) – Apple is at loggerheads with India over a bid to defer a rise in import taxes on mobile phone parts so it can expand iPhone manufacturing in the country.

The world’s biggest company has been in talks with Indian officials for months, seeking government tax breaks for expanding operations in one of the world’s fastest-growing smartphone markets.

Apple wants India to defer an existing policy to levy taxes on imported mobile components in line with Prime Minister Narendra Modi’s ‘Make in India’ drive to boost domestic manufacturing.

No policy exemptions

While India’s government has been keen to get Apple to manufacture in India as a showpiece investment, it has told the US firm there would be no policy exemptions, so there will be no tax breaks on parts imports, according to sources.

“Apple wants duty-free imports of components. India wants indigenisation,” said one person with direct knowledge of the talks.

Apple wants immediate import tax relief to expand its iPhone manufacturing Photo: Shutterstock

Apple has expressed willingness to include locally-made components over time, but has stuck to its demand for immediate import tax relief to expand its iPhone manufacturing, the person added.

Apple declined to comment, and there was no response from either Modi’s office or the Ministry of Electronics and Information Technology, which is trying to help build an electronics manufacturing base.

Stumbling block

The disagreement could be a stumbling block, and risks delaying Apple’s plans to penetrate the Indian market, where it currently just assembles its iPhone SE model.

While the government has publicly said it is still considering Apple’s demands, the people familiar with the talks said it has made clear it won’t make any special concessions.

“We have told them, please come and invest but we cannot do things that go beyond our policies. We cannot do things only for you,” said one senior government official with direct knowledge of the matter. “They are coming around (to our view).”

Apple has said it would be able to create 5,000-10,000 jobs in India when it expands there, the official said.