The Telegraph
Saturday , June 28 , 2014
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VAT slash cheer for auto units

Local trade and industry outfits have welcomed the state cabinet’s decision to reduce VAT on motor parts from the existing 14 per cent to 5 only.

The cabinet took a decision in this effect on Thursday to provide the much-needed boost to the industry.

“We are happy that our longstanding demand to rationalise VAT has been considered. It will immensely benefit manufacturers of auto components. Though VAT was supposed to boost the local trade, the high rate was proving detrimental for businesses here,” said Bharat Vasani, vice-president of the Singhbhum Chamber of Commerce and Industry (SCCI), the largest trade outfit of Kolhan region.

The economy of Kolhan largely depend on the auto sector as over 600 ancillary units of Tata Motors are situated in adjoining Seraikela-Kharsawan district. SCCI has for long been seeking a reduction in VAT to encourage competition among local players.

According SCCI president Suresh Sonthalia, the reduction will definitely boost production and sale of heavy vehicles manufactured by Tata Motors, which will now be able to save Rs 1 lakh to 1.50 lakh on each truck or tipper.

Managing director of the Adityapur Auto Cluster Limited (AACL) and former president of Adityapur Small Industries Association R.K. Sinha pointed out that the local manufacturers were facing a tough challenge from their counterparts in neighbouring Bengal and Bihar, where rates were far more competitive.

“Due to a higher VAT rate in Jharkhand, most of our customers were preferring to buy spare parts from the neighbouring states. This has been affecting the prospects of the trade in Jamshedpur badly,” he explained.

Sinha, who also owns an ancillary unit of Tata Motors at Adityapur, added that the automobile major was also contemplating to shift manufacturing of some of the commercial models to Pantnagar in Uttarakhand, where the company enjoyed a tax holiday.