Apple is currently advocating for a change in India’s income tax laws. The tech giant aims to avoid taxation on the advanced iPhone manufacturing equipment it supplies to its contract manufacturers, a tax burden it believes could impede its significant expansion efforts in the country, according to inside sources.
This lobbying effort comes at a time when Apple’s footprint in India is rapidly expanding, as the company strategically shifts its manufacturing base away from China. Industry data from Counterpoint Research reveals a remarkable surge: iPhone’s market share in India has doubled to 8% since 2022. Furthermore, India’s contribution to global iPhone shipments has quadrupled in the same period, now standing at 25%, though China still dominates with 75% of shipments.
As the world’s second-largest mobile market, India presents a massive opportunity. Apple’s key manufacturing partners, Foxconn and Tata, have already invested billions into establishing five production facilities. A substantial portion of these investments is allocated to procuring sophisticated and expensive machinery essential for iPhone assembly.
According to tax experts, Apple could face billions in additional taxes if it alters its current operational model without first persuading the Indian government to modify a 1961 law that addresses foreign ownership of equipment utilized within India.
In contrast, Apple’s established practice in China involves purchasing manufacturing machinery and then providing it to its contract manufacturers, retaining ownership without incurring tax liabilities on these assets.
However, this model clashes with India’s existing Income Tax Act. Under current regulations, Apple’s ownership of such machinery would be classified as a ‘business connection,’ making the company’s iPhone profits subject to Indian taxation. This information comes from a high-ranking government official and two other industry insiders.
Sources indicate that Apple executives have engaged in discussions with Indian officials over recent months, aiming to refine the law. The company is concerned that the current legal framework could significantly hinder its ambitious growth prospects in the region.
An industry source explained, ‘Contract manufacturers can only invest so much.’ They added, ‘If this long-standing law is updated, Apple’s expansion would be greatly simplified, allowing India to become a more attractive and competitive player on the global manufacturing stage.’
This report is the first to detail Apple’s specific concerns and its lobbying activities regarding this particular legislation.
Requests for comment from Apple, as well as India’s IT and finance ministries involved in these discussions, went unanswered.
Boosting smartphone manufacturing is a core objective of Prime Minister Narendra Modi’s economic agenda. Last year, India’s deputy IT minister privately voiced concerns that countries like China and Vietnam could outpace India as leading smartphone export hubs, primarily due to their more favorable tariffs on phone components.
A senior Indian official confirmed that ‘discussions regarding taxation rules affecting Apple are actively underway.’ However, New Delhi remains cautious, recognizing that altering the law could potentially compromise its sovereign authority to tax foreign corporations.
The official described the situation as ‘a difficult decision,’ emphasizing that the significant increase in Apple’s investments in India is also a crucial factor to consider.
Since 2023, Apple has opened several directly-owned retail stores across India, complementing its sales through online and traditional distributors. Its manufacturing partners, Foxconn and Tata, have collectively invested over $5 billion to establish Apple production facilities in the country.
Tax experts frequently reference the case of UK-based Formula One as a legal precedent. In 2017, India’s Supreme Court ruled that Formula One was responsible for paying taxes on profits generated during its Grand Prix India event, even though it didn’t own the racing circuit, because it exercised full control during those periods.
Experts argue that if Apple were to directly own the machinery within Indian iPhone factories, it would, under existing laws, be seen as exercising a level of control that triggers tax obligations.
Riaz Thingna, a partner at Grant Thornton Bharat LLP, warned that ‘if Apple’s activities are deemed a ‘business connection,’ India could calculate its taxable income based on a portion of its global revenue, potentially resulting in billions of dollars in tax liabilities.’
Taiwanese firm Foxconn stands as Apple’s largest contract manufacturer in India. By August of this year, Foxconn had already shipped products valued at $7.4 billion, a figure nearly matching its total shipments of $7.5 billion for the entirety of 2024, according to publicly available customs data.
Interestingly, this particular income tax law doesn’t pose a challenge for Apple’s South Korean competitor, Samsung, primarily because Samsung manufactures almost all of its phones in its own factories located within India.
The India Cellular & Electronics Association (ICEA), an organization supporting Apple’s position, has submitted a confidential request to the government. In it, they advocate for amendments to the law, stressing that ‘tax certainty is paramount for businesses seeking to expand and scale.’
Without explicitly naming any company, the ICEA highlighted that ‘typical contract manufacturers often lack the capacity or inclination to invest in such vast amounts of specialized equipment,’ noting that ‘the cost of this equipment can reach billions of dollars.’
They further indicated that in some instances, this equipment ‘may even be provided free of cost.’