India clears tax hurdles for Apple to expand iPhone production
What's the story
Apple has received a major boost from the Indian government, just as it is looking to expand its manufacturing capabilities in the country. A recent change in income tax regulations has removed a key hurdle for Apple's iPhone production plans in India. The change now allows Apple to invest directly in the machinery required for manufacturing its devices.
Regulatory hurdles
The tax implications in question
Apple relies on contract manufacturers like Foxconn and Tata to assemble iPhones in India. However, Indian tax rules raised questions about the implications of Apple directly paying for high-end machinery used on factory floors. There were fears that such funding could be interpreted as a "business connection" in India, potentially exposing Apple to taxes on its local profits, despite not operating the factories itself.
Tax exemption
Government's new rule allows foreign firms to provide equipment
To avoid these complications, Apple's manufacturing partners had to shell out billions of dollars from their own pockets to buy equipment, slowing down the pace of production. However, the Indian government has now approved a revision to its income tax rules. The updated framework allows foreign companies to provide manufacturing equipment to local contract manufacturers without triggering additional tax liability.
Tax clarity
Apple can now directly fund machinery without triggering taxes
Apple had been seeking this clarity for some time, fearing that financing iPhone-making machines in India could lead to taxes on its sales profits. The concern was serious enough that Apple chose to stay hands-off while its partners bore the financial burden instead. Now, Revenue Secretary Arvind Shrivastava has confirmed the change, saying "If you bring your machine, and that machine is used by a local manufacturer to produce something, we will exempt you for five years."
Manufacturing boost
Why this matters to Apple
The tax rule change comes at a crucial time for Apple, which has been steadily increasing iPhone assembly in India to reduce its reliance on China. The company has already started assembling newer iPhone models in India and production volumes have been increasing year after year. The ability to directly fund advanced machinery will lower costs, speed up expansion, and give Apple more control over how quickly capacity can grow.