In the wake of the industry bodies' demand for reduction in Value Added Tax (VAT) rate on automobile components, the state government has decided to honour their wish.

Chief minister Hemant Soren has assured the Confederation of Indian Industry (CII) delegation that the government is keen to address to the concerns of the industry body in the greater interest of the state's economy.

Amid conflicting reports of global automobile company Tata Motors making plans to shift its Jamshedpur plant to Pantnagar ( Uttarakhand) owing to high VAT rate in the state, the decision of the government to reduce the VAT has come as a relief to the industry body.

"We are indeed pleased to hear that the chief minister has decided to reduce VAT rates," said CII Jharkhand chapter chairman S K Behra.

Talking to the reporters on the sidelines of a business conference in city on Tuesday, the top CII functionary said necessary steps in this direction will be initiated, soon.

The CII delegation that had met the CM at his office on Monday evening apprised him of the competition faced by the local automobile sector including Tata Motors because of high rate of VAT in the state and sought a cutback at par with the neighbouring states of Bengal and Bihar.

"The companies engaged in the automobile sector in Jharkhand have to cough up 12 to 14 per cent VAT against 4 and 5 per cent in Bengal and Bihar respectively, as a result of which companies like Tata Motors face stiff competition in the global market," said Behra counting the demerits of high VAT rate.

He said the prevailing business scenario does not augur well for the state automobile industry if the current VAT rate continues.

"Imagine if Tata Motors shift its plant then what problem it could cause to the people here," said Behra adding that over 20,000 workers will be rendered jobless directly, not to mention the big revenue loss to the state exchequer.

Listing the merits of lower VAT rate, noted industrialist Behra said people would buy and register their vehicles in the state bringing in more revenue to the state government.

"We have asked for 4 to 5 per cent VAT on all products including ancillary products such as engine, axil, propeller, among other items, to promote business in Jharkhand," said Behra.