To build data centres, tax breaks aren't enough, Pg12

Key Highlights:

• Union Budget 2026-27 offers a 21-year tax holiday to foreign companies providing global cloud services via Indian data centres.
• The policy mandates cloud providers to operate through a domestic entity, ensuring a predictable tax presence.
• Safe harbour provisions set a predefined 15% profit margin for data centre and IT services, simplifying internal pricing.
• Non-resident firms can store server components in bonded warehouses in India at a fixed profit margin.

Detailed Insights:

• The tax incentives aim to anchor physical infrastructure and create related jobs in India, reducing external uncertainties.
• Component warehousing with lower tax costs enhances logistics and maintenance for global cloud infrastructure.
• This policy shapes supply-side decisions by global firms, fostering a base of globally integrated data centres.
• Reliable power, strong network connectivity, and streamlined land acquisition are crucial for data centre success.

Key Concepts Involved:

• Data Centre: A facility housing computer systems and associated components, such as telecommunications and storage systems.
• Safe Harbour Provision: Rules that lessen or eliminate a party's liability if specific conditions are met.
• Bonded Warehouse: A secured facility approved by customs authorities for storing goods before duties are paid.