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GST regime prevents Apple from taking a larger bite for itself

Anil Budur Lulla
24th Mar 2017
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The iPhone maker’s pitch to the government for special favours to reduce excise and customs duty as well as relax norms on local sourcing of components for its Bengaluru plant has not been accepted by the Department of Industrial Policy and Promotion citing the Goods and Services Tax Act which will come into effect from July 1.

The Indian government has declined to make special concessions to favour Apple whose Taiwan-based manufacturer is setting up a unit in Bengaluru to make the iconic iPhones.

Taiwanese company Winstron will make Apple iPhones at its Bengaluru facility.

The unit, coming up at Peenya Industrial Estate, is the global brand’s first in Asia outside China and it had taken several months of sustained negotiation for the Karnataka government to locate it here. The unit is ready to roll out its first batch of assembled-in-India iPhones which are expected to hit stores as early as June this year. In two years from now, the phone maker would start sourcing up to 30 percent components locally.

Apple, which was in discussions with the Indian government, had asked for many exemptions which included a request for a 15-year period of excise and customs reduction. As it would have imported a large percentage of components, it had asked for import duty reductions as well as excise concession for setting up the plant in India. It had also asked the government to go slow on the rule of sourcing up to 30 percent components locally, an officer explained.

However, after due consideration, the Centre has decided that such special exemptions cannot be extended to only one manufacturer as three other foreign phone manufacturers — LeEco, LG, and Hauwei — were already present and following the industrial policy laid out for the sector.

Secondly, in the light of GST coming into effect from July 1 this year, the DIPP feels it cannot extend special concessions to any one company in the sector and wants to establish a level playing field.

The Karnataka government has now said that it is not a setback for Apple or its manufacturer Winstron. Union Minister Nirmala Sitharaman had already indicated that the Centre could not change rules just to suit one player as it would be very unfair.

Apple iPhones have been gaining a significant market share in the premium category and had last year sold 2.5 million units in India through direct sales as well as bundling with offers from telecom providers. The price of the Make in India phone is expected to drop at least by 15 percent, Karnataka IT minister Priyank Kharge, who led the negotiation along with Industries Minister RV Deshpande, told YourStory.

Winstron’s presence in Bengaluru would also be a huge boost for the electronics industry here, he added.

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