The Gujarat government is making all efforts to heal the wounds inflicted on the Nano project in West Bengal. It has announced that it would defer payment of value added tax liabilities on Nano for the next 20 years. This proves to be an ultimate sweetener for the project which comes along with other tax sops offered to Tata Motors for its Nano project to produce the world’s cheapest car.
According to the current VAT structure in Gujarat, the state government levies a 15 percent VAT on sales of cars in Gujarat which approximately amounts to Rs. 15,000 per Nano car. The total VAT liability comes to Rs. 375 crores for the company if it produces 2.5 lakh cars annually. Thus, the total amount comes to around Rs. 7500 crores in 20 years. The government has decided to defer this payment for the entire period of 20 years. Moreover, the loan granted by the state government amounting to Rs. 95 billion in the form of land and other amenities also becomes payable by Tata Motors from the 21st year. The Rs. 95 billion will be disbursed to the company out of which Rs. 2900 crores will be given to the company and the remaining will be spent by the government towards development of infrastructure, etc.
