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Apple’s request for tax concessions in India has been formally rejected by its Finance Ministry. The request made by the US smartphone giant will now be referred to the council that oversees taxation on goods and services in India. Apple announced earlier this year that it would start manufacturing its iPhones in the country by the end of April. The decision was made to comply with the Prime Minister’s ‘Make it in India’ initiative - which requires smartphone manufacturers to produce 30% of their product’s components on India soil in order to open a retail location in the region.

It has been disclosed by IT state minister P.P. Chaudhary that Apple requested concessions ranging from duty exemption on manufacturing and repair units, components capital equipment, parts and consumables for 15 years. He said that Apple’s demands had been examined in the department of revenue, but that they took the decision not to grant the request because of a new ‘tax regime’.

All imports will be liable to IGST and any exemptions from CGST, SGST and IGST can be granted based on the recommendations of the GST council only. However, the tech firm will still proceed with its original arrangements to start building the iPhone SE in a manufacturing facility which is owned by Taiwanese contract manufacturer Wistron. However, Apple still has to wait for GST to be rolled out before it can cement any future plans.

India has an economy of $2trillion so it is both a lucrative and fertile ground for any smartphone maker and Apple has already lost ground on its lower cost rivals in India – Samsung reigned supreme at the top of the smartphone charts in the country, and was followed by China’s Xiaomi. Both Samsung and Xiaomi have established manufacturing facilities in the country, but neither has requested any concessions or incentives from the Indian government.

However, analysts are predicting that Apple has a huge potential for growth in India – and will be assisted by the increasing competition among telecommunications companies in the country. Newcomer Reliance Jio has been disrupting the telecoms industry with lower prices and higher 4G connectivity, pushing existing players to make their own packages more affordable. These developments are expected to encourage smartphone adoption in the country, along with the need for cashless payment platforms after Modi’s demonetization move caused a spike in demand for smartphones.