India Mulls 20-Year Tax Holiday, GST Relief To Speed Up Data Centre Growth: Report

India is weighing sweeping incentives to boost its data centre industry, according to a draft of the National Data Centre Policy reviewed by Business Standard.

The proposal suggests a tax holiday of up to 20 years for developers that meet benchmarks on capacity addition, energy efficiency and employment generation.

The draft, now open for stakeholder consultations, aims to position India as a leading base for cloud services, AI modelling and digital infrastructure amid surging demand for storage and computing power.

Key measures include a 20-year income tax exemption tied to performance, and GST input credits on capital assets such as construction material, cooling systems, HVAC units and electrical gear.

Foreign firms leasing or operating at least 100 MW could gain permanent establishment status, while eligible players may be encouraged to set up AI or global capability centres alongside their data facilities.

Business Standard reported, citing officials, that the policy is intended to spur job creation and spread advanced technologies, AI, cloud computing and cybersecurity, beyond metros to Tier-II and Tier-III cities.

The move comes as India’s data centre market expands rapidly, logging a 24 per cent compound annual growth since 2019.

JLL estimates 795 MW of fresh capacity will go live by 2027, lifting the total to 1,825 MW, with occupancy already at 75-80 per cent.

To address structural hurdles, the policy suggests earmarking land near industrial corridors, IT hubs and manufacturing zones for data parks.

It also seeks to secure steady electricity supply through coordination with power agencies and to promote renewable energy, including uniform rules on storage and even small modular reactors for major hubs.

Officials stressed that abundant, green power will be essential to sustain next-generation infrastructure as India’s digital economy accelerates.

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