VAT set-offs: Major companies threaten to shift from city

With huge investors banking on the city and the state,recently,several key companies had threatened to move out their investments from the state over this issue.

Written by Express News Service | Pune | Published: February 23, 2012 2:01:56 am

Even as Maharashtra stands to boast Rs 1.12 lakh crore being approved by a high power committee in terms of investment in the state for this fiscal and nearly 25,000 crore in investments for Pune,key companies are threatening to withdraw from Pune over the issue of Value Added Tax (VAT) or sales tax at source set-offs.

This has prompted the government to do a rethink. The state industries department said they are giving the matter the highest priority and would come out with a solution soon. Principal secretary,industries,Dr K Shivaji told The Indian Express that the government is discussing the issue as it has definitely “affected the sentiment of investors in our state.”

“The cause of unrest will be addressed. The amendment in the act came into place last March. There have been issues and we have had several discussions. Since it is affecting sentiment of investors and those wanting to expand in the state,there will be a rethink. We will take up the matter on high priority,’’ he said.

With huge investors banking on the city and the state,recently,several key companies had threatened to move out their investments from the state over this issue. The companies included Volkswagen,Mahindra and Bajaj. This pullout would cost the state losses in terms of investment running into more than 4,000 crore. With all the three companies having their base in Pune at Chakan,Dr Shivaji said that there were feelers from many companies in Pune and in the state about the unrest. “Pune is a seat for the auto sector and many leading companies have invested in the city. There is definitely unrest after the VAT Act amendment 52 (a). The industries department and the finance department are discussing the issue.’’

Only a day ago,Dr Pawan Goenka,President,Automotive and Farm Equipment Sectors M&M,said at a media interaction that it was not a comfortable situation and they were considering moving out of the state as they had planned their next phase of expansion. He had said that they had talked to the government and since the government had not yet found a solution,they would take a decision for their new investments over the next month and ould not wait any longer. He had said that only 16 per cent of their sales come from Maharashtra while the rest was outside the state.

The amended rules meant that the set-off was available only on one-sixth of the sales,thus impacting cash flow. Mahindra is in talks with other state governments for setting up a new plant,which will have an annual capacity of 250,000 units. They require 400 to 500 acres of land for their new Greenfield project.

P Balendran,vice-president,General Motors,said that this is a very pertinent issue and it has been taken up with the state government several times. “We have had several meetings with the industries department and finance department as well as the Chief Minister. We are hoping that a solution comes up soon,” he said.

The state had changed rules for VAT set-offs last year. According to the new rule,car makers will only be provided VAT set-offs for vehicles sold in Maharashtra. This makes it difficult for them to realise their total value of incentives.

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