Maharashtra lifts taxes on car purchases in the state

The government of Maharashtra state in Western India announced that it will begin to impose a 20% tax only on the registration of imported and company-owned vehicles. The state government had previously imposed an excise duty of 22% on the purchase of petrol-powered cars and 26% on diesel-powered cars. The move came after the transport department revealed that thousands of buyers were having their cars registered in neighboring states, which had lower taxes. But the state government stood pat on its decision not to refund Value Added Taxes (VAT) imposed on vehicles manufactured in the state, despite the decision of several automakers to halt investments in the state. Volkswagen AG became the latest automotive giant to announce that it would put on hold its plan to infuse a total of Rs2,000 crores (US$360.5 million) in Maharashtra. “The normal investments required for usual operations of the company is going on but the big plans for the future have been put on hold at the moment,” said John Chacko, chief representative of Volkswagen Group India. “We are talking to the state government to sort out the issue. We want to work in a stable, conducive environment and would like to get what was committed to us.” The state had previously attracted auto makers to set up production plants there by refunding the VAT levied on all vehicles. But in 2011, the policy was changed and the government began to refund VAT only on the car models sold within the state. (May 18, 2012)