The factory, located close to the southern city of Chennai, once employed 8,000 people and was renowned for high-tech manufacturing.
Nokia has since become part of a long-running tax dispute, which started in 2013, and it has prevented the vendor from transferring the facility as part of Microsoft’s acquisition of the company’s handset division.
Nokia has since been unable to sell the factory or offer services to other companies until the tax issue is resolved, and it announced this week it will cease production from November.
It had agreed with Microsoft to temporarily keep the factory running, but announced in a statement that it blamed the Indian government for the production halt.
“The continuing asset freeze imposed by the tax department prevents Nokia from exploring potential opportunities for the transfer of the factory to a successor,” said a statement.
Nokia stressed that it had not closed the factory entirely, but this is likely to be the inevitable solution, according to analysts.
The operations of Vodafone and IBM in India have also been disrupted by Indian tax authorities.
Nokia’s dispute stems from a disagreement over the value of payments made by its Indian subsidiary to its parent entity over the development of software.
Indian authorities claim Nokia is liable for tax payments worth approximately $1.1 billion.
