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India not likely to cave to Apple's taxation, import law change demands for manufacturing expansion

Apple and India are once again at loggerheads about expanding iPhone manufacture in the company, and the country's taxation authority is not likely to concede to demands for more slack in local part sourcing requirements, a lighter tax burden on imported components, or the call for governmental assistance with capital investment.




According to a report from Reuters on Monday, Apple is looking to add up to 10,000 jobs in India with an expansion to its existing manufacturing base. To do so, Apple is seeking capital equipment incentives, import and export of phones after repairs, as well as the reduction of the part sourcing requirements and taxation in place.

Sources familiar with the matter claim that the India government has told Apple that there would be no exemptions from existing policy, and no breaks on the 10 percent tax on imported parts that it currently assesses. A document prepared by India's information technology ministry claims that the Apple's demands "may not be feasible" to implement.

"Apple wants duty-free imports of components." once source told Reuters. "India wants indigenization."

Manufacturing the iPhone SE and possibly other devices in the future with expansion in India fulfills a number of conditions imposed on Apple as a condition of doing business, along with providing tax breaks. However, the new demands that Apple is making in order to expand manufacturing in the country may pose a problem in the long run —or may just be a tactic that the government has used in the past of "leaking" information, and essentially negotiating through the press.

Assembly of the iPhone SE at the Karnataka Wistron facility began in mid-May. Officials in the Indian government hope the price for the iPhone SE will be cut in time by as much as $100 compared to the current local price, though Apple is likely to try and avoid too much of a reduction in order to preserve its margins.

The first iPhone SE models built in India by Wistron went on sale in various cities around India in June. The devices are marked "Designed by Apple in California, Assembled in India."

As far as sales channels are concerned, Apple is considering flagship stores in New Delhi, Bangalore, and Mumbai —all three locations where most of India consumers wealth is centered. This is in addition to the Apple Authorized Reseller expansion that Apple was said to be examining in March.

In response to a question at the most recent Apple earnings conference call, Apple CEO Tim Cook said that there was "great momentum" in India, but Apple was still "gaining understanding" of the market.