Centre Plans To Exempt Data Centres From Taxes For 20 Years

In a bid to give fillip to the data centre industry, the Centre has proposed that data centre developers be exempted from taxes for a period of up to 20 years.

According to the draft National Data Centre Policy 2025, reviewed by Business Standard, developers will be exempted from taxes if they meet the targets for capacity addition, power usage effectiveness and employment generation. 

The electronics and information technology ministry (MeitY) is likely to request the finance ministry to allow input tax credit on GST, which is levied on capital assets such as, data centre construction, heating ventilation, air conditioning equipment and other electronic equipment used in data centres, the report said.

The draft policy proposes that the IT ministry should coordinate with the power ministry, the Central Electricity Authority and other key government-led bodies to enable power accessibility to data centres.

The draft policy is currently being circulated among stakeholders for consultations. 

The policy is aimed at giving a push to the industry amid the increasing demand for data centres. The number of internet users is expected to hit the 1.2 Bn mark by 2030 in India, and this requires development of cloud infrastructure which is powered by data centres. 

Besides, the rapid adoption of AI has led to a sharp rise in the demand for data centres, which are critical for the technology. Data centres provide computing power, high-speed networking and large-scale storage needed to train and deploy complex AI models. 

Notably, the Centre launched the IndiaAI Mission with an outlay of over INR 10,000 Cr to establish AI compute infrastructure through a public-private partnership and develop AI foundational models covering major Indian languages for priority sectors like healthcare, agriculture, and governance.

Three AI startups – Soket AI Labs, Gnani.ai and Gan.ai – have been selected under the Mission to develop India’s indigenous AI models. 

Encouraged by the rise in AI usage, many global AI and big tech companies are investing in the country’s data centre market. For instance, OpenAI is planning to set up its data centre in India and is looking to partner with local players to set up the data centre which would have at least 1 gigawatt (GW) capacity. Google is also planning to invest $6 Bn to build a 1 GW data centre and allied power infrastructure in Andhra Pradesh. 

The Economic Survey for 2024-25 said that India’s data centre market is expected to reach a size of $11.6 Bn by 2032.