Modi government plans 20-year tax exemption for data center developers
What's the story
The Indian government is considering a tax exemption of up to 20 years for data center developers. The proposed incentive is part of the National Data Center Policy draft, as reported by Business Standard. The policy aims to make India a global destination for cloud infrastructure, AI modeling, and digital services amid soaring demand for storage and computing power.
Incentive details
Incentives contingent on meeting targets
The draft policy proposes a generous incentive structure, including a tax holiday of up to 20 years. However, this is contingent on data center developers meeting certain targets related to capacity addition, energy efficiency, and job creation. The policy also proposes extending GST input tax credit to capital assets such as construction material, cooling systems, HVAC, and electrical equipment.
Global impact
Provisions for foreign players
The draft policy also has provisions for foreign players. Companies leasing or operating a minimum of 100 MW capacity could get permanent establishment status in India. The draft policy also encourages eligible firms to set up AI development centers or global capability hubs in the same city as their data facilities. An official told Business Standard that this would create new jobs and strengthen domestic capacity in advanced technologies, not just in metro cities but also Tier-II and Tier-III towns.
Infrastructure support
Addressing land and power challenges
The draft policy also addresses two major challenges facing the sector: land and power. It proposes that states should reserve land near industrial corridors, IT hubs, or manufacturing clusters for data center parks. The IT ministry will work with other ministries to ensure reliable access to power. Developers will be encouraged to use renewable sources of energy as much as possible.
Industry growth
India's data center industry growing at 24% CAGR
India's data center industry has been growing at an impressive 24% CAGR since 2019. JLL estimates that by 2027, an additional 795 MW of capacity will come online, taking the total to a whopping 1,825 MW. Occupancy rates are already at a high of 75-80%, indicating demand far outstripping supply.