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Maharashtra offers two-year sales tax sop to auto sector; Indica price won't be cut, says Tata group

Maharashtra government today deemed projects of investment over Rs 15 billion in the automobile sector as mega projects in the ''A'' category area in Bombay and Pune under the package scheme of incentives 1993.

An official release on Thursday said the government has also decided to amend the Package Scheme of Incentives 1993 making it applicable in "A" category areas (Bombay metropolitan region and Pune metropolitan region) for the mega projects in the automobile sector.

To qualify for sales tax incentives under the Package Scheme of Incentives 1993, the minimum investment in fixed capital would have to be Rs 15 billion. Sales tax incentives would be available for a period of two years, subject to a monetary ceiling of ten per cent of the gross fixed investment made in such a project.

In Bombay, new investments of expansion of existing investments are governed by the industrial location policy. Government has also decided that subject to the clearance from Maharashtra Pollution Control Board and with due regard to environmental considerations, new mega projects in auto sector will be permitted in Bombay metropolitian region as well as expansion and the industrial location policy shall stand modified accordingly.

The government has already defined mega projects in B, C, D, and D + areas of the state as the ones having investment in gross fixed assests in excess of Rs 7.5 billion in Vidarbha and Marathwada regions and in excess of Rs 10 billion in the rest of Maharashtra but excluding "A" category areas in Bombay and Pune.

The government has also granted a two-year tax holiday on sales tax and purchase tax on all components that go into making Telco's Indica, the country's first indigenously developed passenger car, the project for which is estimated at Rs 17 billion.

Fiat Auto, which is setting up a new unit at Ranjangaon near Pune, and Mahindra & Mahindra are among the two companies whose car projects are likely to benefit in future.

Maharashtra government has also waived the Central sales tax of two per cent on the Indica for two years. The sales tax for a car sold in the state is 10 per cent and the purchase tax is about 6 per cent.

It is learnt Telco had already already taken into consideration a probable relief in sales tax while announcing the price of Indica on the eve of New Year. Market is rife with speculation on whether Telco will pass on the benefit to customers. Media reports quoted Telco officials as saying that the relief is only for two years while they were looking at long-term strategies.

In fact, on Friday afternoon, officials of the Tata group said in Bombay that they are in no mood to reduce the prices of Indica.

There is no move to reduce the prices in the light of the sales tax sop. We are yet to get any notification from the authority concerned, one official said.

"In case we get any concessions from the government, we will make adjustment in final payment with the buyers of the car," he added.

Apparently, the Tata group does not want to disturb the growing interest of the car among the prospective buyers by revising the prices at this junction.

Recently, the bookings for the Tata Indica have been extended from January 17 to 23.

The Tata group has so far invested Rs 14 billion in the car project near Pune to produce 150,000 cars per annum. Telco will invest Rs 2 billion by March 1999 and Rs 1 billiom more by September 2000.

Additional reportage by UNI

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