October 29, 2025

Apple is turning up the heat on the Indian government to change the Income-Tax Act of 1961. Why? Apple wants ownership of special machines used in factories by contract makers like Foxconn, Tata, and Pegatron to NOT be counted as a taxable ‘business connection’ in India. Right now, Indian law says owning such equipment can create a ‘permanent establishment’—which means Apple might have to pay tax here on some profits. Apple already enjoys many perks! From cheaper labour and tariff benefits to subsidies like PLI, SPECS, and ECMS, plus state help in Karnataka and Tamil Nadu. So why does Apple want a special exemption claiming their contract makers “cannot put up money”? Experts say this claim is weak. Right now, Indian manufacturers pay about 25.2% tax, foreign companies with a permanent establishment pay even higher rates — around 35% plus surcharges. If Apple’s setup creates a business connection, it should pay taxes fairly. Changing the law just because Apple dislikes tax rules could open floodgates for many others and weaken tax fairness. Indian law is simple: if you do business here, you pay tax here! Apple’s plan risks breaking this basic rule. They want to hide the big machines on Indian soil from taxes. But should these tools be invisible for tax purposes when they’re key to making tons of products? Some support the new global tax idea, ‘Pillar Two’, which sets a 15% minimum tax worldwide. But it doesn’t help India claim its share if local laws say Apple has no taxable connection. India’s local top-up taxes won’t cover offshore profits if nexus is denied. So India would lose tax rights willingly. Foxconn, Tata, and Pegatron have invested billions in India and keep growing. The government already supports them through PLI and subsidies. If buying expensive tools hurts cash flow, the answer is better finance, not bending tax laws. India’s banks and leasing companies can own and lease these machines to manufacturers. Financial tools like vendor financing and consortium lending can help. This keeps assets in India and strengthens the local economy without making tax laws a tool for one big company’s benefit. Changing nexus rules just for Apple brings many hidden dangers. Others will want the same treatment. Tax officers will face tough questions on who really controls the machines. The risk of companies gaming the system is huge. Also, India has already shown openness with tariffs and subsidies. Giving one brand special tax breaks weakens India’s hand in future talks and international tax rules. Some say China lets Apple get away with this. But copying China’s lax rules would hurt India’s plan to build real manufacturing, not just simple assembly lines. India wants to be smart, not just cheap. So what should Apple do? Let Indian groups own or lease the machines with clear, fair terms. Keep Apple’s staff off Indian factory floors or limit their roles to avoid crossing tax treaty lines. Accept that some profits linked to Indian work must be taxed here. This is fair since India is a big market for Apple. This plan won’t stop Apple from growing big in India but will keep India’s tax base healthy and fair. (Note: These are the writer's views and do not reflect Economic Times’ official position.)

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Tags: Apple, India tax law, Permanent establishment, I-t act 1961, Manufacturing, Tax nexus,