The Society of Indian Automobile Manufacturers held meetings with three state governments in recent weeks. The state government of Maharashtra, Gujarat and Karnataka assured the SIAM members that they will stick to their earlier commitments.
An official at Siam said, “All three have assured us that the benefits will continue so that the viability of a project is not impacted.” Meanwhile, auto giants like Tata Motors, Mahindra & Mahindra and Bajaj Auto have shown concerns, over their large investments to set up car production units in the account of state promotion subsidies. The subsidies will be in the form of a refund of the VAT or CST.
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Automobile companies have been seeking assurances regularly for the state governments over the promised tax incentives on the investments made under the GST regime. The Siam official said a meeting with the Tamil Nadu government “As the Government is yet to be formed due to the demise of Tamil Nadu CM, we have plans to do the meetings soon,” he added. Tamil Nadu is an essential automobile hub for prominent car makers like Hyundai, Ford, Renault-Nissan and BMW as these companies have heavily invested in the states in the recent years.
“If the promised benefits are not honored, a state risks future investments,” said an industry official.
GST is expected to roll-out from April or September next year; it will subsume all state and central taxes. Since GST shall be levied on the consumption end and it could take place in between the states. So, there are chances to re-channel the incentives to the companies.
D K Srivastava, chief policy adviser at Ernst & Young, said, “Non-tax incentives promised by states will be continued in the GST. There will be problems in honoring the tax incentives,”Such a decision, whenever it happens, will not be specific to one sector,” he added.
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Siam also met with the officers in the revenue department of the Union finance ministry and received an assurance that the benefits of excise would be reimbursed in some form for the remaining span after GST implementation.
