India Hesitant to Give Apple Tax Incentives to Build iPhones

Apple store Delhi
A man talks on his iPhone at a mobile phone store, New Delhi, India, July 27, 2016. Adnan Abidi/REUTERS

India is resisting tech giant Apple's demand for tax incentives to make iPhones in the country, with the trade minister saying Thursday that the government may not make exceptions for the U.S. company.

Apple wants to open its own stores in India, but has been asked by the government to locally source at least some of the components, as part of Prime Minister Narendra Modi's bid to boost manufacturing in the country.

Apple has sought tax concessions, including lower import and manufacturing duties, to make iPhones locally, according to a government official familiar with the situation.

Trade Minister Nirmala Sitharaman said if India were to agree to any concessions, they would likely apply to all smartphone manufacturers, and not just Apple.

Apple declined to comment.

Apple's Chief Executive Tim Cook met Modi last May to talk about its plans to enter the Indian manufacturing and retail space. Cupertino, California-based Apple wants to boost iPhone sales in India, where it has only a roughly 2 percent market share, as sales in the U.S. and China slow.

Smartphone component maker Wistron, which counts Apple among its customers, has applied for permission to expand its plant in Bengaluru, a regional government official told Reuters Monday.

The tech giant had earlier asked for a permanent relaxation of rules requiring 30 percent local sourcing for foreign retailers setting up single-brand outlets, which was rejected by the finance ministry. India has relaxed these rules for just three years for single-brand foreign investors.

India had also refused to allow Apple's proposal to import and sell refurbished mobile phones in the country.

The company has again sought a permanent waiver from local sourcing conditions as it imports most of the handsets to sell in India and other countries, another official said.

India offers capital subsidies for companies manufacturing electronics goods in India, coupled with tax incentives for investments in special economic zones and allows tax-free imports of some components used to make mobile handsets.

"We have sent Apple's file to the revenue department," a top industry department official told Reuters. He said an inter-ministerial panel of the trade, electronics and finance ministry could take a final decision.