The government has amended tax provisions to allow foreign firms to supply machinery to Indian contract manufacturers without tax exposure, a move expected to accelerate electronics manufacturing and strengthen India’s role in Apple’s global supply chain.

India has introduced a significant policy change aimed at accelerating electronics manufacturing, offering major relief to global companies such as Apple that rely on contract manufacturers. Under the revised framework, foreign firms can now supply machinery to Indian contract manufacturers in select zones for up to five years without triggering tax liabilities linked to ownership.

The move addresses a long-standing concern for Apple, which has been expanding its manufacturing footprint in India as part of its strategy to reduce dependence on China. Industry estimates show India’s share of global iPhone production has risen sharply in recent years, while the brand’s presence in the domestic smartphone market has also strengthened.

Removing a key tax uncertainty

Previously, Apple faced the risk that supplying expensive manufacturing equipment to its Indian partners could be interpreted as creating a taxable business connection in India. This uncertainty forced contract manufacturers such as Foxconn and Tata Electronics to bear the high upfront cost of purchasing machinery themselves.

The updated rules clarify that foreign ownership of machines used by Indian contract manufacturers will not, by itself, lead to tax exposure. The exemption applies for five years and is limited to facilities located in customs-bonded manufacturing zones, which are treated as outside India’s customs territory.

Government officials said the intent is to promote large-scale electronics manufacturing by removing legal ambiguity and offering greater certainty to global investors. If goods produced in these bonded facilities are sold within India, applicable import duties will still apply, making the model more suitable for export-oriented production.

Manufacturing push gains momentum

The policy change was announced as part of the Union Budget for 2026–27 and aligns with the government’s broader objective of positioning India as a global manufacturing hub. Smartphone production, in particular, has been identified as a key driver of employment, exports, and technology transfer.

Tax experts say the decision lowers a major barrier for multinational companies looking to scale operations quickly in India. By allowing foreign firms to directly invest in high-end machinery, the burden on local manufacturers is reduced, enabling faster capacity expansion.

While Apple has not publicly commented on the announcement, analysts believe the clarity could encourage the company and other electronics players to deepen their manufacturing commitments in India. The change also highlights India’s willingness to recalibrate policies to remain competitive in the global supply chain realignment underway across the technology sector.