rediff.com

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News 
Rediff.com  » Business » Gujarat govt tells Maruti to rethink VAT refund

Gujarat govt tells Maruti to rethink VAT refund

May 30, 2014 16:59 IST

Gujarat govt tells Maruti to rethink VAT refund

     Next

Next
Sohini Das in Ahmedabad

Maruti Suzuki India’s proposed factory in Gujarat is faced with a technical hurdle.

In the process of reworking the state support agreement, thanks to the new scheme proposed by MSIL, the state government is learnt to have objected to offering value added tax-related concessions twice, once to the manufacturer and then again to the seller.

MSIL has been asked to suggest a new formula.

Click NEXT to read further. . .


Image: Maruti Celerio.
Photographs: Courtesy, Maruti Suzuki

     Next

Gujarat govt tells Maruti to rethink VAT refund

Prev     Next
Prev

Next

After the company’s board of directors had approved the plan that the Gujarat plant would be built by a wholly owned subsidiary of MSIL’s parent company, Suzuki Motor Corporation, MSIL had officially approached the state government in January to incorporate the changes in the SSA.

Around March, the proposal was referred to the finance department for review, after being discussed in the chief secretary’s committee on mega projects.  

In a meeting earlier this week between the chief secretary and company representatives, the state government is learnt to have objected to being asked to offer VAT refund to the SMC subsidiary and then again to MSIL.

Click NEXT to read further. . .


Image: Maruti Swift.
Photographs: Courtesy, Maruti Suzuki

Prev     Next

Gujarat govt tells Maruti to rethink VAT refund

Prev     Next
Prev

Next

By the original agreement between MSIL and the government, MSIL was both producer and seller.

In the revised scheme of things approved by MSIL’s board, the production would now be by a new company, Suzuki Motor Gujarat Pvt Ltd, a wholly owned subsidiary of SMC. SMGPL would exclusively manufacture and sell vehicles to MSIL.

A senior state government officer said, “Now, SMGPL becomes the manufacturer, and MSIL is the distribution agent.

“The company has sought VAT refund at both these stages, when SMGPL sells the vehicles (at cost price and no profit) to MSIL, and then again when MSIL sells these cars in the market.

Click NEXT to read further. . .


Image: Maruti Ertiga.
Photographs: Courtesy, Maruti Suzuki

Prev     Next

Gujarat govt tells Maruti to rethink VAT refund

Prev     Next
Prev

Next

“In a way, the VAT refund then becomes two-fold, and there arises a technical problem.” 

The government and the company now need to decide how the tax benefits would be divided between MSIL and SMGPL.

“MSIL has been asked to come up with a fresh formula, while the state government would try to think of an alternative, too,” the official added.

A company spokesperson said, “We are in regular discussion with the Gujarat government to clarify and resolve any issues that might arise.

“We are not able to disclose the contents of the discussion at this stage.”

Click NEXT to read further. . .


Image: Maruti Alto.
Photographs: Courtesy, Maruti Suzuki

Prev     Next

Gujarat govt tells Maruti to rethink VAT refund

Prev     Next
Prev

Next

In June 2012, MSIL had signed an SSA with the Gujarat government for purchase of land and setting up of a manufacturing facility.

SSAs typically contain guidelines related to payment installments, dates of commissioning, etc.

MSIL has been offered a refund of VAT for 15 years, provided the amount did not exceed the company's investment in the state.

Asked if the cap for VAT refund offered to the company could be lowered to accommodate a two-fold VAT refund, the officer said it was highly unlikely.

“It is more of a legal-technical issue, when the government cannot offer a VAT refund to both entities for the same product at two different points in time,” he said.

Click NEXT to read further. . .

 


Image: Maruti 800.
Photographs: Courtesy, Maruti

Prev     Next

Gujarat govt tells Maruti to rethink VAT refund

Prev     More
Prev

More

Tax trouble

  • The state government has objected to offering value added tax-related concessions twice, once to the manufacturer and then again to the seller
  • Maruti had officially approached the state government in January to incorporate the changes in the state support pact
  • The government and the company now need to decide how the tax benefits would be divided between MSIL and SMGPL

Image: A worker adjusts the windscreen wipers of a parked Alto car at a Maruti Suzuki stockyard.
Photographs: Amit Dave/Reuters

Prev     More
Source: