Apple Urges India to Revise Tax Rules That Could Slow Down Expansion Plans
Apple Inc. has reportedly asked the Indian government to reconsider parts of its income tax law that could potentially hinder the company’s fast-growing manufacturing operations in the country. According to a report by Reuters, the tech giant is seeking clarity on whether it could face tax liabilities for expensive iPhone assembly machinery it owns and provides to its contract manufacturers in India.
The request comes as Apple accelerates its efforts to diversify its global production base and reduce reliance on China. India — now the world’s second-largest mobile phone market — has become a major focus for Apple’s long-term manufacturing and retail expansion strategy.
Apple’s Manufacturing Shift Toward India
In recent years, Apple’s contract manufacturers such as Foxconn and Tata Electronics have invested billions of dollars to set up iPhone production plants across India. These facilities rely heavily on high-end assembly machines supplied directly by Apple. However, under India’s current Income Tax Act of 1961, ownership of such equipment could be interpreted as creating a “business connection” — meaning Apple’s profits could be subject to taxation in India, even if production is carried out by local partners.
This differs from the situation in China, where Apple also owns the machinery used by contract assemblers but is not taxed for it under local laws. Experts warn that if India enforces its tax rule strictly, Apple could face billions of dollars in additional tax liabilities, potentially slowing down its plans to scale up manufacturing in the country.
Talks Underway Between Apple and the Indian Government
Sources told Reuters that Apple executives have held multiple meetings with Indian authorities to discuss the matter and request an amendment to the law. “Contract manufacturers cannot put up money beyond a point,” one industry insider explained. “If the legacy law is updated, it will make Apple’s expansion easier and make India more globally competitive.”
The Indian government, while eager to attract foreign investment, is reportedly handling Apple’s request cautiously. A senior official confirmed that discussions are ongoing, but no final decision has been made. “It’s a tough call,” the official said. “India needs investments, but we also have to protect our right to tax foreign companies.”
Tax Concerns and Legal Precedents
Tax experts have pointed to a 2017 Supreme Court ruling involving Formula One, where the court held that the UK-based organization was liable to pay taxes in India because it had control over a racing circuit during its event, even though it did not own it.
“If Apple’s operations are deemed to constitute a business connection, the company’s global revenues could be used to calculate income attributable to India,” said Riaz Thingna, partner at Grant Thornton Bharat LLP. “This could lead to a significant tax exposure running into billions.”
Industry Impact and Broader Implications
Apple’s manufacturing push in India has already started to show results. According to customs data, Foxconn, Apple’s largest contract manufacturer in the country, shipped products worth Rs 7.4 billion by August this year — nearly matching its total exports for all of 2024.
Meanwhile, Samsung, another major smartphone maker, remains unaffected by these tax complications as it manufactures most of its devices in its own Indian facilities.
The India Cellular and Electronics Association (ICEA) — which represents Apple and several global tech firms — has also urged the government to update the existing law. It emphasized that tax predictability is “paramount for businesses seeking to expand and scale.” The association noted that contract manufacturers are often unable or unwilling to invest in high-value specialized equipment, which can cost billions of dollars, and is frequently supplied directly by parent companies like Apple.
Balancing Growth and Governance
Since 2023, Apple has also opened its first retail stores in India, further deepening its commitment to the market. With Foxconn and Tata together investing over ₹5,000 crore in Apple-linked projects, India stands to gain significantly from a stable policy environment that encourages high-value manufacturing.
While the government continues to review Apple’s proposal, industry observers believe that a balanced approach could help India maintain its momentum as a global electronics hub — while giving companies like Apple the tax clarity they need to expand further.
