MC EXCLUSIVE Google's $10 billion Vizag data centre gets tax certainty; AP ensures no retrospective levy: IT Minister Nara Lokesh

Nara Lokesh

The Andhra Pradesh government and the Centre have coordinated to ensure that all taxation level hurdles are cleared for Google to build the $10-billion worth data centre in Vishkhapatnam, Nara Lokesh, Minister for Information Technology, Electronics and Communications, in the AP government told Moneycontrol.

"We made sure that there is no retrospective taxation in this space (data centres). Since data will get processed in these centres, we got clarity from the Central government, how will it be taxed," Nara Lokesh told Moneycontrol in an exclusive interview.

The Minister said that he met Google executives for the first time in September 2024, and drove them "personally" to the site in Vishakhapatnam where the hyperscale data centre will be built. "It’s going to be India’s largest FDI investment ever," Nara Lokesh noted.

The proposed Raiden Info Tech (Google’s subsidiary) data center project in Visakhapatnam (Vizag) involves an investment of Rs 87,520 crore ($10 billion) and is expected to create 188,000 jobs, while adding Rs 10,518 crore annually to Andhra Pradesh’s gross state domestic product (GSDP) during the 2028–2032 period.

"In Andhra Pradesh, we’ve a double engine 'bullet train'. We’re not only able to provide best-in-class incentives, but are also able to help in terms of policies…including what is required to be done at the central level," the Minister said.

On the taxation front, we have brought clarity on how to define ‘permanent establishment’, to ensure tax certainty.

Watch the full interview on YouTube, here.

Under income tax laws, a PE is a fundamental concept within the framework of Double Taxation Avoidance Agreements (DTAAs) – tax treaties between countries. It essentially sets a minimum threshold of presence that a foreign enterprise must have in a country for that country to have the right to tax the enterprise's business profits.

Nara Lokesh also explained that the Andhra government has brought certainty on the treatment of data to ensure that India origin data stays within the country.

On the land provided to Google for investment, Lokesh said that it’s on a market price that was mutually agreed upon by the state government and the company. "We have the right talent, the right ecosystem, and the speed of doing business," said the Minister.

He pointed out that 50 percent of MLAs are first timers, and 17 of 25 ministers are first timers. "We bring in raw energy, passion to solve problems. We’re in it together," said Lokesh, adding that the first thing he does is to create a WhatsApp group where all updates pertaining to a project is provided on a weekly basis.

Data centres and sustainability 

The Minister noted that data centres are not a drain on the state’s power and water resources, as it has become in some parts of the world. For instance, Ireland, Netherlands, and Singapore have imposed moratorium on new data centre projects primarily due to the massive amount of electricity it consumes.

Nara Lokesh said that Andhra Pradesh with its vast coastline has been working on strengthening its renewable energy sector. Tata Power Renewable Energy Ltd (TPREL), a unit of Tata Power Co, had signed an agreement in March to develop renewable projects worth as much as Rs 49,000 crore ($5.6 billion) in Andhra Pradesh, making it one of the largest renewable energy investments in the state.

He added that India should not put a moratorium on data centres. "Andhra Pradesh has wind, solar, and even thermal power sources," he said, adding that there will be separate power-grid for data centres. "Google will pay for the power grid, and part of it will be subsidised by the state."

More investments in the pipeline

Besides Google, the AP government has approved a $1.9 billion investment by Sify for a 550 MW data center facility as well. The state has secured 1.6 GW in data centre commitments, and aims to scale up to 6 GW over the next five years.

Moreover, ArcelorMittal has announced to invest $16.6 billion to build a shore-based integrated steel plant, which will be India’s largest steel plant. Bharat Petroleum Corporation Ltd (BPCL) also proposed in August an investment of about $10.7 billion for an oil refinery and petrochemical complex.

"In the coming years, more investments would be announced in the technology, agriculture, manufacturing and tourism sectors," said the Minister.

Nara Lokesh explained that the state is emphasizing on a "Speed of Doing Business" approach to eliminate procedural delays, which is causing companies to invest in the states. The state government has also launched policies on high-growth areas such as the 'Industrial Development Policy 4.0', 'Electronics Policy 4.0', 'Food Processing Policy 4.0', and 'Integrated Clean Energy Policy 4.0' to offer incentives for businesses.

Also, the coordinated approach with the central government on policy tweaks and tax incentives has helped Andhra Pradesh to receive such mega investments.