India allows Apple import tax-free import of components for local assembly

The government has finally agreed to allow Apple import mobile handset components tax-free for use in local assembly, reports quoting official sources said on Tuesday.

The tax concessions are tied to Apple increasing local value addition over a stipulated time period, the report quoted union minister of electronics and IT Ravi Shankar Prasad as saying.

While Apple Inc wants to expand its contract manufacturing in India, its biggest market, the iPhone maker is looking at boosting profit margins while also seeking a bigger share in one of the world's biggest smartphone markets.

Cupertino, California-based 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.

Apple had initially sought a 15-years tax holiday for all components that it would import for setting up a manufacturing facility in India, besides waiver of other local taxes.

A panel of ministries, however, rejected that demand and has offered a phased programme to increase the share of local parts and components 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,'' Reuters quoted Sundararajan as saying.

Apple, she said, had earlier also agreed to increase local manufacturing of components gradually – increasing it over a period of time - but there was a difference between the plans of the two sides, she said.

India wants Apple to raise local value addition in phases of 3,5,7 and 10 years as the local capacity builds up, joining Prime Minister Narendra Modi's plans to boost local manufacturing.

Industry estimates the phased manufacturing programme could increase local value addition in mobile phones to 40-50 per cent in the next three years.

Prasad had earlier said his ministry was in constant touch with Apple and other mobile phone manufacturers for expanding facilities and setting up new plants.

However, he said, the government and the company are yet to agree on the finer terms of Apple's India venture, adding that India was ready to work out a roadmap to encourage manufacturing.

Industry estimates total value of mobile phones produced in India touched near Rs90,000 crore ($13.90 billion) compared with Rs54,000 crore in the previous year.