Apple, India wrangle over import tax on mobile parts



Apple Inc. has asked India to postpone the expected increase in import taxes on mobile phone parts so that it can expand its iPhone-making in the country, but the government is unlikely to adhere to it.

The American technology giant has been in talks for several months with Indian officials, seeking "pre-requisites" – tax cuts and government incentives – to expand its operations in one of the markets of the most dynamic smartphones in the world.

During these talks, Apple expressed its wish that India postpone an existing policy to impose taxes on imported mobile components, in line with Prime Minister Narendra Modi's "Make in India" campaign for stimulate national manufacturing.

While the Indian government wanted Apple to manufacture in India as a flagship investment, it told the US firm that there would be no policy exemption, so that there would be no tax breaks on parts imports.

"Apple wants to import components duty free.India wants to indigenize," said one person with direct knowledge of the talks.

Apple has expressed its willingness to increase local value-added over time, but has maintained its demand for immediate tax relief to import to expand its iPhone-making, added the person.

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

The disagreement could be a stumbling block, and may delay Apple's plans to penetrate the Indian market, where it is currently assembling its iPhone SE model. Despite a boom in smartphone sales in India, Apple's market share is only about 2%.

Apple has asked for tax relief because India still lacks an ideal ecosystem for parts manufacturers to thrive. Counterpoint Research data show that more than three-quarters of smartphones sold in India are locally-made, accounting for about 90 percent of the $ 14 billion worth of mobiles

the components are imported.

To change this scenario, India imposes a 10% tax on imported components such as batteries, chargers and headsets.

As part of a "Staged Manufacturing Program" (PMP), the government plans to extend taxes to more components in order to push coin manufacturers to switch to more local production .

"It's a chicken and egg problem for component suppliers to set up manufacturing operations in India," said Neil Shah, a director of Counterpoint. "Apple and its partners will eventually have to comply, otherwise Apple will always set a price for its products."

A previously unpublished note, prepared by the Indian IT Ministry to evaluate Apple's claims, shows that the company has requested an exemption from the PMP, which the ministry said "not to be feasible".

Some of the other requirements of Apple – including incentives for the purchase of equipment goods and permission to import and then export phones after repair – would require policy changes, according to the note.

While the government has publicly stated that it still considers Apple's demands, the people who know the discussions said that it had made it clear that it would not do anything. special concession.

"We told them, please come and invest but we can not do things that go beyond our policies.We can not do things just for you," said a senior government official with direct knowledge of the issue. "They come around (in our opinion)."

Apple said it would be able to create 5,000 to 10,000 jobs in India as it expanded, the manager said.



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