Wednesday, February 22, 2012
By Manoj Kumawat
VAT refunds issue: Mahindra & Mahindra to walk-off from the new investment
The country’s leading auto brand, Mahindra & Mahindra (M&M) is facing trouble for its new investment of Rs.4,000 crore in Maharashtra over the VAT refunds issue by the state government. The Volkswagen, Bajaj Auto and other giant automakers are also threatened to depart their new investments from the state.
The Automotive & Farm equipment President of Mahindra & Mahindra, Pawan Goenka has said that the changes made for the VAT set-off by the state government is adversely affecting the annual cash flows of the company. It is disturbing the company’s equation of the expansion plans. Company has four functional production units for six passenger vehicles in Maharashtra.
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With an intention to solve out this problem, M&M is discussing with the other state governments to establish its new manufacturing plants having production capacity upto 2.5 lakh units. M&M has been told by the state government that they are finding the solution after the company had taken up the issue.
Company is keenly looking for some new investments and will take a discussion within a month, can’t wait for the long time, he added further. Goneka has addressed that the according to pervious rules state government used to offer VAT set-off over the total vehicles sold by the company but, the new changes will affect the annual cash flows.
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Whereas, the new rules allow the government to offer set-off for the vehicles sold in the state only. It will increase the time period for the company to realise the total value of the incentives. Maharashtra has contribution of only 16 percent in the entire sales of the company that means one-sixth set-off.
Now, for setting-up the new manufacturing plant company is looking for a minimum 400-500 acres area, said Goenka. Due to the ongoing VAT refund issue and decreasing potential investment opportunities in Maharashtra, Ford India is also opted the Gujarat to establish its second plant. It is to be noted that Mahindra is getting overwhelming response for its Mahindra XUV 500 and Mahindra Xylo.