State industries minister Narayan Rane admitted this was a major
issue raised by the automobile industry. “My ministry will soon seek the
intervention of the chief minister and the finance minister with a plea to
reconsider the revised scheme implemented from April onwards,” he told Business
VAT IN THE EYE OF A STORM
of VAT set off claimed on gross sales basis,
the government has replaced by claiming VAT
set off on net sales basis which has been
objected to by the automobile industry
industries minister Narayan Rane said, “My
ministry will soon seek the intervention of
the chief minister and the finance minister
with a plea to reconsider the revised
& Mahindra has expressed its displeasure
over the functioning of the state government
for withdrawing “VAT set-off” that M&M gets
for vehicles sold outside the state
Rane’s move comes close on the heels of objections raised by the
Mahindra & Mahindra with the revised VAT set off scheme by the automobile
A state government official, who did not want to be identified,
explained companies were able to claim VAT on components under the old rules.
Companies were allowed to claim VAT set-off on the entire production, including
sales outside Maharashtra. They also allowed the companies to set up two
separate arms dealing with the marketing and sales and the manufacturing.
Earlier, the companies would sell the entire production, from the manufacturing
arm to the marketing and sales arm, to claim VAT set-off for sales within
Maharashtra. The marketing arm would then, in affect, bill it to the other
states across the country.
However, the official said according to the revised rules, the companies would
not be able to claim the VAT set-off for products manufactured for Maharashtra
and sold outside the state.
“The state government has proposed to provide land and a customised incentive
package to Ford. However, due to the revised scheme to claim VAT set off for
sales on net basis, the different in Maharashtra and Gujarat comes to 9.5 per
cent. Therefore, Ford must have preferred Gujarat for its investments,” the
official informed. He reiterated the industries ministry would soon take up with
the chief minister and the finance ministry for an early resolution of the
Meanwhile, Sports utility vehicle (SUV) market leader Mahindra & Mahindra, is
understood to have revisited its investment plans for the second phase of
expansion of the Chakan plant.
The company has expressed its displeasure over the functioning of the state
government which has decided to withdraw “VAT set-off” that M&M gets for
vehicles sold outside the state. The Congress-led government has withdrawn the
12.5 per cent VAT benefit for the nearly 70 per cent vehicles M&M sells outside
Pawan Goenka, president automotive sector, M&M said, “We have had several rounds
of talks with government officials at various levels. We have been concerned for
the past four months. Despite the constant dialogue, nothing has happened. It
will be hard for us to look at this state for future investment. We will re-look
at the second phase of investment at Chakan to see if it still is financially
viable for us”, he added.
M&M was scheduled to make the final part of the Rs 5,000 crore investments into
the second phase of expansion at the Chakan plant near Pune where it makes
sports utility vehicles and trucks.
“We haven’t seen any big ticket investment coming into Maharashtra lately. Most
of them have gone to other states”, added Goenka.
The Chakan plant project, which was inaugurated last year, is spread across 700
acres having an installed capacity of 300,000 vehicles per annum which would be
scaled up at a later stage.
Business Standard, India, dated