Apple gets import tax relief

New Delhi: India has offered to allow Apple to import mobile handset components intended for use in local manufacturing tax free, a top government official said on Tuesday.

The tax concessions will be subject to the condition of increasing local value addition over a period of time. Apple wants to expand its contract manufacturer’s facility in the Indian tech hub of Bengaluru, Ravi Shankar Prasad, the union minister for electronics and IT, said on Tuesday, as the iPhone maker seeks a bigger share in one of the world’s biggest smartphone markets.

Apple last week started making iPhone SE at its Taiwanese contract manufacturer Wistron’s plant in Bengaluru.

Apple, which sold over 50 million iPhones in the March quarter, down 1 per cent year-on-year, is looking for new markets as its sales in China have weakened. Among a set of tax concessions, Apple had initially sought a 15-years tax holiday for all components that it would import for setting up a manufacturing facility in India.

A panel of ministries rejected that demand and has offered a phased programme to increase the share of local production in the manufacturing, Aruna Sundararajan, secretary at the ministry of electronics and IT said.

“We have offered them tax exemptions on those components which could not be manufactured in India,” Ms Sundararajan told Reuters, adding that local manufacturing component would have to be increased gradually.

Apple has agreed to increase local share in production over a period of time, but there was a difference between the plans of the two sides, she said. Apple was not immediately available for comment.

India wants Apple to raise value addition share in phases of 3,5,7 and 10 years as the local capacity builds up, part of Prime Minister Narendra Modi’s plans to boost manufacturing. Industry estimates the phased manufacturing programme could increase local value addition in mobile phones manufacturing to 40-50 per cent in the next three years.