India Proposes 20-Year Tax Exemption and GST Relief to Boost Data Centre Sector

The Indian government is considering a significant policy shift to bolster the country’s data centre infrastructure. A draft of the National Data Centre Policy suggests offering up to 20 years of tax exemptions and extending Goods and Services Tax (GST) input tax credits to developers. This move aims to attract both domestic and international investments, positioning India as a global hub for data storage and processing.

Policy Highlights:
The proposed incentives are contingent upon developers meeting specific criteria:

• Capacity Expansion: Developers must contribute to increasing the country’s data storage capacity.
• Energy Efficiency: Projects should adhere to standards that promote sustainable energy use.
• Employment Generation: Initiatives should create job opportunities, particularly in Tier 2 and Tier 3 cities.

Additionally, the policy proposes granting permanent establishment status to foreign companies operating or leasing at least 100 MW of data centre capacity in India. This would provide them with the same tax benefits as domestic entities.

Implications for Tier 2 Cities:
The emphasis on employment generation is expected to stimulate economic growth in smaller cities. By establishing data centres in these areas, the policy aims to decentralize technological infrastructure, reducing the burden on metropolitan regions and promoting balanced regional development.

Conclusion:
India’s proposed data centre policy reflects a strategic move to enhance its digital infrastructure. By offering substantial tax incentives and GST relief, the government seeks to attract significant investments, fostering growth in both urban and rural areas. If implemented, this policy could play a pivotal role in India’s digital transformation.