Apple is serious about India, it wants to make and manufacture here, and sell more to its 1.3 billion people. But, the iPhone-maker seems to be facing some difficulty in navigating governmental regulations. Apple had requested the government to defer an upcoming increase in import taxes on mobile phone parts so that it could expand its manufacturing base in India. However, the government is unlikely to accept that, Reuters reports. This is not the first time that the government has overturned Apple’s requests for tax breaks and incentives.
The government is believed to have made it clear that there would be no tax exemptions on imported mobile components, and Apple should just get on with its investment and commitment to the ‘Make in India‘ initiative. “Apple wants duty-free imports of components. India wants indigenization” an official was quoted as saying. While Apple has expressed interest in increasing local contributions to its manufacturing process, its demand for quick import tax relief has delayed proceedings.
Apple reckons that India still doesn’t have the ecosystem for parts-makers to thrive. Hence, it wants to continue importing certain components even if it assembles its iPhones in India. While Make in India has been a success in electronics, and more than 75 percent of all smartphones sold in India are manufactured locally, close to 90 percent of the mobile components continue to be imported. And that is a $14 billion market, according to Counterpoint Research. To reduce this dependence on import, the government levies a 10 percent tax on components like batteries, chargers and headsets.
Apple’s low market share (about 2 percent) in India’s burgeoning smartphone market is a direct result of this. Its products are priced at a premium, and will continue to be so since the government is in no mood to give it special treatment in terms of taxes and incentives. In the past, Apple had also requested for duty exemption on raw materials for manufacturing components and capital equipment for 15 years. An official was of the view then that “India needs to support Apple to create an ecosystem, which was done for Maruti-Suzuki.” However, that seems unlikely now!