India plans 20-year tax breaks to power data center boom: report

India is weighing a sweeping package of incentives for data center developers, including tax breaks of up to 20 years, under a new draft National Data Centre Policy circulated for consultation, Business Standard reported.

The benefits would hinge on firms meeting targets for capacity expansion, power efficiency, and job creation.

The draft said the ministry of electronics and information technology is expected to approach the finance ministry to allow input tax credit on GST paid for capital assets such as construction, electrical systems, and cooling equipment.

India’s data center market has been expanding rapidly, with JLL estimating a 24% annual growth since 2019. Capacity is projected to reach 1,825 megawatt (MW) by 2027, up from the current 1,030MW.

The policy also proposes that foreign companies operating or leasing at least 100MW of capacity from Indian providers be given permanent establishment status, with guidelines to follow.

Developers may be encouraged to set up artificial intelligence or global capability centers alongside their data hubs.

The proposed move is expected to “help create new jobs as well as strengthen domestic capacity in advanced technologies, such as AI and machine learning, cloud computing, cybersecurity, not just in metro cities but also in Tier-II and Tier-III cities and towns,” the report said.

States would be urged to earmark land for data centers near industrial corridors, IT hubs, or manufacturing clusters, creating dedicated zones for infrastructure development under the proposed policy, the report added.