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Auto sector cheers VAT cut proposal
February, 24th 2014

The automobile sector in the state is upbeat about the double bonanza - in the form of excise duty cut by the Centre and reduction of VAT on motor parts by the state government - and feels the proposal in the supplementary budget will provide "level playing field" to it with the manufacturing sector.

"We are happy that our longstanding demand to rationalize VAT has been considered in the annual budget," said Santosh Khetan, a functionary at Adityapur Small Industries Association (ASIA).

The Federation of Jharkhand Chamber of Commerce and Industries (FJalso welcomed the move and thanked chief minister Hemant Soren living up to his promise made to Jharkhand Inc in January.

The Rs 50,387-crore budget, which was tabled on Friday by finance minister Rajendra Prasad Singh, proposed to slash the 10% VAT on automobile parts to half giving a breather to the ailing car sector in the state. The ongoing economic slowdown has led to big players, like Tata Motors in Jamshedpur, cutting corners and forced many ancillaries to shut shop.

"It was imperative for the state government to bring down VAT and ensure level playing field to the automobile and manufacturing industry particularly at a time when there are slowdowns and neighbouring states are attracting the industry with rational VAT rate," said Suresh Sonthalia, FJCCI zonal vice president.

The CII delegation, which met Soren in January, had apprised him about the competition being faced by the local automobile companies because of high VAT rate and urged him to reduce it at par with states like West Bengal and Bihar.

"Companies operating in the automobile sector in Jharkhand have to cough up 12-14% VAT as against 4% and 5% in West Bengal and Bihar, respectively, compelling companies to face tough competition," said a CII Jharkhand council member.

The VAT reduction proposal will bring relief to 1,000-odd ancillaries of Tata Motors that is struggling to cope with the ongoing economic recession.

"The decision of state government to reduce VAT (in the coming financial year) will address the long overdue tax concerns of the ancillaries," explained Singhbhum Laghu Udyog functionary.

"With excise duty cut (announced by the Union government) and reduction in VAT, the year ahead seems good for the auto and manufacturing industry in Jharkhand," said Bharat Vasani, Singhbhum Chamber of Commerce and Industry (SCCI) functionary.

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