New Tax Proposal Could Strengthen India’s Role in Apple’s Global Supply Chain
Apple could receive a significant boost from India’s proposal to extend tax exemptions until 2041 for foreign companies supplying machinery and components to contract manufacturers in the country, a move that could further support the company’s expanding iPhone manufacturing operations.
The proposed changes are aimed at providing greater tax certainty to foreign companies that supply high-value equipment and critical components to manufacturers operating in India. The move follows lobbying by Apple, which had sought changes to India’s income tax framework over concerns that ownership of machinery supplied to its contract manufacturers could expose the company to additional taxation.
The proposal comes at a crucial time for India’s electronics manufacturing ambitions. Apple has increasingly shifted production capacity away from China as it diversifies its global supply chain. According to Counterpoint Research, India is expected to account for 26% of global iPhone production in 2026, compared with just 6% four years earlier.
If approved by Parliament, the proposed amendments could provide manufacturers and global technology companies with greater certainty while supporting India’s broader objective of becoming a major electronics manufacturing hub.
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Tax Exemption Extension Designed to Provide Certainty
According to a draft of the proposed tax amendments seen by Reuters, the government plans to extend tax exemptions for foreign companies providing equipment to their contract manufacturers in India until March 31, 2041.
The move is particularly significant because India had introduced a similar exemption only in February, but that measure was scheduled to remain valid until 2031.
The earlier change followed concerns raised by Apple regarding the treatment of machinery supplied to its manufacturing partners.
Apple had been concerned that Indian tax rules could potentially treat its ownership of expensive manufacturing equipment as creating a “business connection” in India. Such a classification could potentially expose portions of the company’s profits to taxation.
The proposed extension would provide a much longer period of certainty for companies making large investments in manufacturing equipment and supply-chain infrastructure.
For an industry that requires significant capital expenditure and long-term planning, predictable tax treatment can be an important factor when companies decide where to locate production capacity.
Apple’s Expanding Manufacturing Footprint in India
The proposed tax changes come as Apple continues to expand its manufacturing presence in India.
The company has been diversifying iPhone production beyond China as part of a broader effort to build a more geographically distributed supply chain.
India has emerged as one of the most important locations in this strategy.
Counterpoint Research estimates that India could produce around 26% of the world’s iPhones in 2026. That would represent a substantial increase from approximately 6% four years earlier.
The rapid rise demonstrates how quickly India’s role in Apple’s global production network has expanded.
For Apple, greater manufacturing capacity in India can help reduce dependence on a single manufacturing base while providing access to a large and increasingly important consumer market.
For India, the expansion supports the government’s efforts to attract high-value electronics manufacturing, create employment opportunities and develop domestic supply-chain capabilities.
What the Machinery Tax Exemption Means
The proposed exemption is focused on foreign companies that provide machinery and equipment to contract manufacturers operating in India.
Modern smartphone production depends on sophisticated manufacturing systems, precision equipment, testing technologies and other specialised machinery. Such equipment can be extremely expensive and may remain the property of the global brand rather than the contract manufacturer using it.
Apple’s concern was that Indian tax rules could potentially create tax exposure because of its ownership of machinery located at manufacturing facilities operated by its partners.
The proposed framework seeks to address that uncertainty by providing a clear exemption for eligible foreign companies.
By extending the exemption until 2041, the government would effectively provide a long-term tax framework for companies making equipment available to Indian contract manufacturers.
That could encourage companies to make larger and longer-term investments in India’s manufacturing ecosystem.
Tax Break Also Covers Component Storage
The proposed amendments go beyond manufacturing equipment.
India has also proposed tax exemptions for foreign companies earning income from storing and providing parts used to manufacture mobile phones and other electronic products to contract manufacturers.
The exemption would apply until 2041.
The measure is expected to cover manufacturers of mobile phones, tablets, laptops, hearing devices and wearable electronic products.
This broader coverage could make the proposed framework relevant to a wide range of global electronics companies and suppliers.
Modern electronics manufacturing relies on highly coordinated supply chains in which components may need to be stored close to production facilities before being transferred to assembly plants.
Providing tax certainty for such activities could help international companies manage their inventory and supply networks more efficiently.
Customs-Bonded Areas Could Become More Important
The proposed tax treatment would apply to factories and warehouses established in customs-bonded areas.
These facilities are technically treated as being outside India’s customs border for certain purposes.
Such arrangements can make it easier for companies to import components and equipment for export-oriented manufacturing without immediately paying domestic customs duties.
However, there is an important limitation.
If products manufactured in these facilities are sold within India, they would attract applicable import taxes.
As a result, the structure is likely to be particularly attractive for companies producing electronics for export markets.
For global manufacturers, this could provide greater flexibility when using India as an export-oriented production base.
Supply Chain Resilience Becomes a Key Consideration
The proposed tax changes also reflect the increasing importance of supply-chain resilience.
Global manufacturers have faced disruptions caused by geopolitical tensions, trade restrictions, transportation challenges and other uncertainties.
Companies are therefore increasingly looking to diversify their production and inventory networks.
Riaz Thingna, a partner at Grant Thornton Bharat, said the proposed changes would allow foreign companies to store and transfer critical equipment and components in India for their contract manufacturers.
According to Thingna, the measures could help reduce supply-chain disruptions arising from trade uncertainties while providing greater tax certainty.
For electronics companies, the ability to maintain equipment and component inventories closer to manufacturing locations can be strategically important.
India could consequently become more attractive not only as a production location but also as a regional supply-chain hub.
Wider Benefits for India’s Electronics Industry
Although Apple is one of the biggest beneficiaries of the proposed changes, the measures are not limited to the iPhone maker.
The draft bill covers a wider group of electronics products, including mobile phones, tablets, laptops, hearing devices and wearable electronics.
That means other multinational companies and contract manufacturers could also benefit if the legislation is approved.
The policy could support greater investment in India’s electronics manufacturing ecosystem and potentially encourage more suppliers to establish operations in the country.
Over time, this could contribute to the development of a deeper domestic supply chain involving component manufacturers, logistics providers, engineering firms and technology companies.
The expansion of such an ecosystem could also reduce dependence on imported components and create opportunities for Indian businesses to become part of global manufacturing networks.
India Proposes Changes for Data Centre Tax Rules
The draft legislation also includes proposed changes related to foreign companies using data centres in India.
India had announced a tax exemption in February lasting until 2047 for foreign companies using data centres in the country to provide services to global customers.
The exemption was designed to address concerns that foreign companies could potentially face taxation on global income because of their use of Indian data-centre infrastructure.
The latest proposal would make the arrangement more flexible by allowing data centres to be leased rather than requiring them to be owned by Indian partners of foreign companies.
According to Grant Thornton Bharat’s Riaz Thingna, allowing leasing could reduce capital requirements and make the market more accessible to smaller and mid-sized companies.
The change could therefore broaden participation in India’s growing data-centre industry.
Lower Capital Requirements Could Encourage More Investment
Owning large data-centre facilities can require substantial investment.
By permitting leasing arrangements, companies may be able to access India’s digital infrastructure without committing the same level of upfront capital.
This could be particularly relevant for smaller and mid-sized businesses that may not have the financial resources required to develop their own facilities.
The proposed change also reflects India’s broader ambition to become an important global destination for digital infrastructure and technology services.
As demand for cloud computing, artificial intelligence, digital services and data storage continues to grow, access to reliable data-centre infrastructure is becoming increasingly important for international companies.
Separate Tax Incentive Proposed for Diamond Industry
The draft legislation also proposes a separate 15-year tax exemption for foreign diamond miners and traders that sell rough diamonds through designated trading zones in India.
The country already plays a major role in the global diamond industry and is recognised as the world’s largest centre for diamond cutting and polishing.
The proposed incentive could strengthen India’s position in the international diamond trade by encouraging foreign companies to conduct more trading activity through designated zones within the country.
The measure represents another part of the government’s broader effort to use tax policy to attract international business activity.
A Broader Push for Investment-Friendly Tax Policies
Taken together, the proposed changes demonstrate a broader effort to provide longer-term tax certainty to international companies operating through Indian infrastructure.
For manufacturers, predictable rules can be important when making decisions involving factories, equipment, warehouses and supply chains.
The extension of the machinery exemption to 2041 could therefore have implications beyond Apple.
The electronics manufacturing sector requires long investment cycles, and companies need confidence that tax rules will remain stable when they commit billions of dollars to production facilities and supply networks.
The proposed framework could help India compete with other manufacturing destinations seeking to attract global electronics production.
What the Proposal Could Mean for Apple
For Apple, the proposed changes could remove an important area of tax uncertainty surrounding its manufacturing operations in India.
The company has invested heavily in expanding its production footprint as it seeks to diversify its global supply chain.
A longer exemption period would provide greater clarity around the treatment of equipment supplied to its manufacturing partners.
That could make it easier for the company and its suppliers to plan future investments.
The proposal also comes at a time when India’s share of global iPhone production is expected to rise sharply.
If the country reaches the projected 26% share of global iPhone production in 2026, India would have moved from being a relatively small manufacturing location to becoming a major pillar of Apple’s global production strategy.
Parliament Approval Still Required
The proposed tax changes are not yet final.
The draft bill will need to be passed by both the lower and upper houses of Parliament before the amendments can become law.
Until that process is completed, the final provisions could still change.
Nevertheless, the proposal signals the government’s intention to provide longer-term certainty to foreign companies involved in manufacturing, supply-chain management, digital infrastructure and international trade.
India’s Growing Role in Global Manufacturing
India’s proposed tax changes come at a time when global companies are reassessing their manufacturing and supply-chain strategies.
The country has been seeking to position itself as an alternative manufacturing destination for multinational companies, particularly in electronics.
Apple’s growing production footprint has become one of the most visible examples of this shift.
The proposed extension of tax exemptions to 2041 could further strengthen that trajectory by reducing uncertainty around equipment ownership, component storage and contract manufacturing arrangements.
If implemented effectively, the measures could support not only Apple’s expansion but also the wider development of India’s electronics manufacturing ecosystem.
For Apple, the proposal offers greater tax certainty at a critical stage of its India expansion. For India, it represents another step toward becoming a larger and more strategically important part of global technology manufacturing and supply chains.
