India's Tax Law Change: A Major Win for Apple

Key Policy Shift

India's government has enacted a pivotal tax law change, exempting foreign companies from income tax on machinery they provide to local contract manufacturers. This strategic move directly benefits major players like Apple by removing a significant investment barrier.

Situation Overview

Previously, foreign firms feared that supplying equipment to Indian partners could create a taxable "business connection," exposing their global profits to Indian taxes. This forced contract manufacturers like Foxconn and Tata to fund capital expenditures themselves. The new rule, effective until the 2030-31 tax year, applies to factories in customs-bonded areas, primarily encouraging export-focused production. This policy aligns with India's goal to expand its electronics manufacturing sector, where it now accounts for 25% of global iPhone shipments, up from just a fraction in 2022.

Economic and Market Impact

This tax exemption is expected to significantly de-risk foreign investment in India's manufacturing ecosystem. By allowing companies like Apple to directly fund high-end equipment, it should accelerate production scale-up and enhance operational efficiency. The policy boosts investor confidence and strengthens India's appeal as a viable alternative to China for global supply chains, potentially leading to increased foreign direct investment in the electronics sector.

Summary and Outlook

The policy change marks a critical victory for Apple's lobbying efforts and a major step forward for India's manufacturing ambitions. Analysts will be watching for an increase in capital investment from global electronics firms, which could further boost India's export volumes and high-tech manufacturing capabilities.

FAQ

Q: What is the core change in India's tax policy?
A: Foreign companies can provide capital goods to their Indian contract manufacturers in specified zones without being subject to income tax on their profits for doing so.

Q: Who does this new rule primarily benefit?
A: It primarily benefits global electronics companies like Apple that rely on contract manufacturing for export-oriented production in India.

Source: Investing.com