'Google Tax' prompts Apple to raise App Store prices

An app costing $0.99 on the App Store in the US will now cost Rs 80 in India against Rs 60 earlier

Apple will increase prices of applications on its App Store in the country, by up to 33 per cent, with the government introducing a 14.5 per cent service tax and the falling value of the rupee.

An app costing $0.99 (about Rs 68) on the App Store in the US will now cost Rs 80 in India as opposed to Rs 60 earlier. The move is part of a global change in prices of apps, an exercise Apple engages in periodically.

Apple communicated the changes in pricing to developers and was reported by digital media outlet MacRumors.

The government introduced a service tax of 14 per cent and levy of 0.5 per cent from December 1 last year on all services sold digitally. This equalisation levy was introduced as part of a global move by nations to tax digital goods sold from outside a country. It is now popularly known as “Google Tax”.

“Price tiers on the App Store are set internationally on the basis of several factors, including currency exchange rates, business practices, taxes, and the cost of doing business. These factors vary from region to region and over time,” said an Apple spokesperson in response to queries from Business Standard. The increase in prices of its apps comes at a time when Apple is looking at a slice of the price-sensitive Indian market, where its global rival Google dominates the smartphone segment. Apple currently controls just three per cent of the Indian smartphone market.

Apple is looking to manufacture its iPhones locally in order to save on taxes and bring down the cost of its devices. The company is looking to partner with Foxconn and Wistron to make devices in India at proposed facilities in Bengaluru, Ahmedabad and Gurugram.

So far the company’s attempts to sway the Indian government to extend further sops for it to setup manufacturing plants in India has been met with resistance.

Further, Apple also plans to open its own stores in India, for which it has sought a waiver of the 30 per cent local sourcing norms for single brand retail. The company is looking to reach a wider set of buyers by owning and controlling the buying experience of its devices in India, a tactic that worked for it in China.