New Delhi, Aug 3: The Indian government has proposed extending tax exemptions for foreign companies that supply machinery and equipment to contract manufacturers until 2041, a move expected to benefit firms expanding production in the country.
The proposed tax exemption will apply to manufacturers of mobile phones, tablets, laptops, wearable devices and hearing equipment.
The government has also proposed tax relief on income earned by foreign companies from storing and supplying components used in the manufacture of these products within customs-bonded zones.
The proposal is part of draft tax amendments aimed at providing long-term policy certainty and encouraging investments in export-oriented manufacturing.
The proposed changes build on tax relief introduced in the Union Budget earlier this year, which exempted foreign companies from tax liabilities arising from ownership of equipment supplied to contract manufacturers operating in customs-bonded zones. The original exemption was valid until 2031.
The extension is particularly significant for Apple, which had lobbied for changes to India’s tax laws to ensure it would not be taxed for owning high-end manufacturing equipment used by its contract manufacturers.
The company had argued that existing provisions could expose it to tax liabilities and complicate future expansion plans in India.
The proposal aligns with the government’s broader strategy to position India as a global electronics manufacturing hub.
By providing long-term tax certainty, policymakers hope to attract greater foreign investment and encourage multinational companies to expand local production capacities.
The amendments will require parliamentary approval before taking effect. If enacted, they could further strengthen India’s appeal as an alternative manufacturing destination amid ongoing efforts by global companies to diversify supply chains beyond China. (BVI)
