Apple approached the Indian government about deferring a planned increase in import taxes on mobile phone components so it can expand local production of iPhones, Reuters reported.
As part of Prime Minister Narendra Modi’s Make in India push, the government plans to tax more imported components to encourage local production. Counterpoint Research estimates 75 per cent of smartphones sold in India in 2016 were made locally, but the majority of components are imported.
Under a phased manufacturing programme, the government plans to impose taxes on more components as a way of pushing parts suppliers to switch to local production.
A source told Reuters Apple wants duty-free imports of components, while the government wants indigenisation and said it won’t offer any special concessions.
Approval of the incentives would enable the iPhone maker to expand output in the world’s second-largest smartphone market and hit the local content requirement needed to open Apple stores in the country.
Both parties now seem unable to reach an agreement.
In October the Indian government reportedly was considering tax and policy changes Apple long pushed for to assemble iPhones locally. An official at the Department of Industrial Policy and Promotion said the government was studying the tax exemptions sought by Apple.
The smartphone giant had pushed for a range of tax incentives to start local production of iPhones for nearly a year, but the Department of Revenue in March rejected its requests. The government had said it was reviewing its overall manufacturing policy to stimulate support for Make in India as well as attract overseas investors.
In early June the government asked Apple to detail its long-term investment plans for manufacturing iPhones and job creation in the country before it will consider a request for tax concessions.
Apple implemented several moves to comply with local content requirements. It started producing iPhone SE smartphones in India in May, with output reportedly between 25,000 and 50,000 units a month.
In August Apple also asked the government to offer tax breaks to its suppliers.