Apple's Negotiations with India Could get tangled in Tax Issues from Individual States where Apple sets up Shop
Patently Apple posted a report on Wednesday that stated that the negotiations between Apple and the Indian government were positive. The report further noted that a top bureaucrat who works closely with Prime Minister Narendra Modi said the government's intention was to "settle with Apple." Apple is reportedly seeking a 15-year tax holiday on imports of components and equipment, the official said. But a new report from India is trying to present an opposing view that it's not going to be that easy for a deal to be made.
While I believe that Indian Prime Minister could cut the red tape to finalize a deal with Apple, the Indian press really wants to put a negative spin the talks.
The snag, according to the India Times, is getting the Indian states to come on board the deal. The report notes that Apple's key demand is predictability and certainty of countervailing duty (CVD) exemption, which will require the support of the states Apple's plant (and stores) would be located and that will require the support of states as the country adopts goods and services tax (GST) in the financial year. Imports will then face integrated GST in place of countervailing duty, which is levied I lieu of central excise duty.
Apple wants an assurance on CVD exemption as the government removed it for a number of components last year and they're concerned that this list may further expand in the coming years. An official stated that "They want predictability and certainty in tax regime as any mid-term tax shock can topple all their financial calculations."
Apple is keen on clarity in CVD exemption as its component makers may not set up shop in India immediately and it may have to rely on imports for some time. Any exemptions allowed would have to be available to all device manufacturers, not just Apple.
In the end Apple is saying that they won't have their supply chain in place for some time and they need the Indian government to understand that and give them the tax breaks needed to ensure that the cost of making iPhones in India is predictable.
When you think of all the hoops that India is making Apple jump through to open a plant for a tiny middle class at present, it's simple to understand why opening a plant in the U.S. is the right thing for America who will be lowering taxes, giving Apple a tax holiday to bring home their $230 billion and more. If Apple doesn't have a supply chain in India and has to create one there, they could do the same in the U.S. to kill that argument.
To learn more about the nitty-gritty details being discussed in India, read the full report Indian report here.