Indian multi-utility vehicle manufacture Mahindra & Mahindra (M&M) has announced its plans to set up a new manufacturing plant outside the state of Maharashtra with an investment of Rs 3,000 – Rs 4,000 crore. The company’s decision to set up the proposed plant out of the state is in response to the new policy announced in the State Budget for 2012-13 which allows for VAT refund only on automobile products that are both manufactured and sold in the state of Maharashtra.
The policy before the new budget was that the state refunded the VAT on all cars manufactured in Maharashtra. As a result of the new policy, M&M is now considering finding an alternative to Chakan near Pune which was chosen earlier.
Similar opposition to the new VAT refund policy had been voiced by Volkswagen in March 2012 which stated that the state must offer consistent policies to attract investments. Volkswagen is now in talks with other state governments to consider investment options.