India’s Department of Revenue rejected Apple’s request for tax incentives for it to start manufacturing iPhones locally, The Economic Times reported.
As part of its preconditions to manufacture in India, the vendor asked for a waiver of custom duties on imports of components and equipment for 15 years as well as an exemption from the country’s 30 per cent local sourcing requirement.
In mid-February, Apple reportedly reached a deal to start assembling lower-priced iPhones in India, with contract manufacturer Wistron due to set up a facility in technology hub Bengaluru (Bangalore) to produce only iPhones. Sources said at the time US-based Apple planned to go ahead with production without waiting for the government to approve a list of requested tax concessions.
It is unknown how the decision by the tax authority will impact Taiwan-based Wistron’s plans to start assembling 4-inch iPhone SE models at the new plant, which was reportedly due to begin as soon as the end of April.
According to The Financial Express, the Bengaluru plant is a pilot project for Apple and the scope of manufacturing India will depend on the concessions granted by the government.
In January, Indian officials said they wouldn’t give in to demands by Apple for special concessions, but the government is reviewing its overall manufacturing policy to stimulate support for its “Make in India” initiative as well as attract foreign investors. While the Finance Ministry said it won’t give exemptions to a single company, it is looking to grant tax benefits for the tech sector as a whole.
Apple first entered talks with the government in late 2016 over local production plans.
With iPhone sales slumping in China, Apple aims to take advantage of rapid smartphone growth in India, which is the world’s second largest smartphone market. iPhone shipments in India reached 2.5 million last year, a third of which came in Q4, according to Counterpoint Research.
The US vendor has no branded Apple stores in India and sells its products through distributors.