Basic Tax Hygeine is Not Grand Industrial Policy
| AUTHOR | Anupam Manur |
| DATE | August 7, 2026 |
| CATEGORIES | Economic Policy Trade |
The Taxation and Other Laws (Amendment) Bill, 2026, introduced in the Lok Sabha on 31 July, extends a tax exemption that most media coverage broadcasts as a “win for Apple.” Apple has lobbied for this and won, but there’s a bit more to this story, according to me.
The actual tax provision is narrow. When a foreign brand owner ships high-end tooling to an Indian contract manufacturer, ownership of that machinery could be read as creating a “business connection” in India, which would expose a slice of global profit to Indian tax. February’s budget carved out an exemption, which ran to 2031. The new Bill only extends it to 2041.
The extension definitely matters and is a move in the right direction. Capital goods in electronics assembly have seven-to-ten year lives, and greenfield capacity decisions run on longer horizons still. A five-year window was shorter than the expected returns on the big capital investments that the exemption was supposed to invite. The finance ministry says as much in its own document: the original window was “too short to plan large, long-term investments.” Fifteen years is long enough that a firm can actually plan around it.
But, here’s the interesting part. India is basically doing what the rest of the world already does. We can skip the gory details, but OECD treats this transfer of tools as tax exempt and the international consensus broadly is that such a transaction should not create a “taxable presence”. So this is not India offering something extra. It is India importing the consensus into domestic law. This is tax hygiene. It removes a self-inflicted disadvantage rather than creating an advantage.
So, this then raises the obvious question: if the treatment is correct, why does it expire? Correct treatment should not have a sunset. A permanent safe harbour in the definition of business connection would do the same work without requiring Apple to lobby again in 2039. Two further caveats. Clause 4(a)(i) quietly narrows the exemption to “specified electronic goods,” and the accompanying list is exhaustive, but crucially some sectors such as medical, automotive and telecom electronics now sit outside it. And the whole structure operates through customs-bonded warehouses, which exist because our component tariff wall makes ordinary importing expensive.
We keep building elaborate workarounds for problems we created. Cutting component tariffs would help every sector, not one, and would not need renewing in 2041.
I spoke about this to a news channel, TRT World: