Andhra CM Chandrababu Naidu seeks law tweaks to boost AI, data cities

Economic Times

25-05-2025

ANI Andhra CM Chandrababu Naidu
Key NDA ally and Andhra Pradesh Chief Minister N Chandrababu Naidu has called for major amendments to central laws to boost data cities, AI innovation, and extend tax exemptions to tier-3 cities.
To attract investment and build data cities, Naidu has told the Centre that the current Income Tax Act discourages foreign Cloud Service Providers (CSPs) from investing in India by classifying them as Permanent Establishments (PEs), which increases their tax burden. According to sources, Naidu flagged this issue to IT Minister Ashwini Vaishnaw, noting that countries like Singapore offer more transparent and favourable tax regimes. He proposed amending Section 9(1)(i) of the Income Tax Act to clearly state that "Indian data centre affiliates do not create a permanent establishment for foreign cloud service providers." Naidu believes this change would reduce litigation risk and enhance India's global competitiveness. Andhra Pradesh plans to develop a Data City in Visakhapatnam, with Google as one of its anchor investors.
Naidu also sought central support for developing an IT ecosystem in Visakhapatnam and Amaravati. Beyond tax changes, he proposed an amendment to Section 52 of the Copyright Act. During his discussion with Vaishnaw, Naidu highlighted that India's Copyright Act currently lacks specific provisions for text-and-data mining, making it difficult to train AI models on publicly available datasets. In contrast, nations like Singapore and Japan offer legal clarity and advantages. He suggested that Section 52 be updated to provide text-and-data mining exemptions for AI development-enabling innovation while protecting intellectual property.The third major proposal Naidu raised involves income tax exemptions for tier-3 cities and rural areas to encourage local co-working spaces and support remote work. He pointed out that Andhra Pradesh has already rolled out four sectoral policies: Electronics Manufacturing, Semiconductor and Display Fab, Information Technology and Global Capability Centre, and a dedicated Data Centre Policy. He urged the Centre to cooperate by making legislative amendments and offering tax exemptions to support these initiatives and drive investment into the financially strained state.Naidu's push for legislative reforms comes at a time when Andhra Pradesh is looking to position itself as a technology hub. With global competition intensifying and companies seeking investment-friendly locations, the chief minister's proposals aim to align India's regulatory environment with global norms to unlock the full potential of AI and data-driven growth.