- Cloud services sold outside India won’t be taxed, but local resellers will still be
- Google, Microsoft and Amazon have all committed billions by 2030
- India wants to become a developed country by 2047, data centers to create jobs
India is set to offer a major new tax incentive to attract cloud AI investments to the country, with the country’s government confirming that no tax will be levied on revenue from cloud services sold externally until 2047 – provided the workloads are run from Indian data centers.
The policy was announced by Finance Minister Nirmala Sitharaman with the aim of boosting the Indian economy, by positioning data centers as a strategic industry rather than just back-end infrastructure.
The hope is that the tax incentive will attract more foreign companies to establish bases in India, creating more jobs and positioning India as a global data center hub.
India wants foreign cloud companies to set up shop tax-free
The policy change reflects part of an ongoing trend in which Big Tech has already committed to spending billions to develop data centers in India.
That includes Google, which pledged $15 billion by 2030, Microsoft pledged $17.5 billion by 2029, and Amazon said it would spend $35 billion by 2030, all to improve AI and data center infrastructure.
More importantly, the incentive applies to foreign companies and domestic sales must go through locally incorporated dealers who are taxed according to normal Indian customs.
However, significant investments will have to go well beyond just campus infrastructure, particularly with tax-free allocations. Critics worry about spotty power supply, high electricity costs and water shortages, not to mention the impacts that high data center usage will have on local communities.
The 21-year timeline of the tax incentive is significant as Prime Minister Narendra Modi has set targets for the country to become a developed nation by 2047, a program called Viksit Bharat (Developed India) (via PMIndia).
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