Renault-Nissan commitment to state doubtful, feels Tamil Nadu govt

Gross output VAT for sales within the state was 14.5% and the CST was 2% on interstate sale

Faster payment of incentives to Renault-Nissan Alliance India Pvt Ltd (RNAIPL) might result in the latter abandoning its project in the state, the government of Tamil Nadu is arguing before the high court here.

The court is looking into the dispute on alleged non-payment of incentives worth Rs 5,000 crore to the company. The bone of contention is a business model change the company implemented between 2012 and 2014; the state alleges this resulted in "unlawful gain" and boosted subsidies in the short term.

The revised model had one manufacturing company, RNAIPL, and two marketing companies, Renault India and Nissan Motors India.

The state's industries department has alleged there might not be any compulsion for the alliance partners to carry on with the business model once the maximum subsidy of around Rs 4,500 crore is given within five or six years as the company wants.

A detailed questionnaire on these allegations, sent to Nissan, was not answered.

The state argues Mahindra & Mahindra was expected to be the lead in the Renault & Nissan consortium when the proposal was first put forward but they then withdrew.

Renault and Nissan decided to set up an integrated automobile project with the yearly installed capacity of 400,000 units, at Rs 4,500 crore investment in fixed assets within seven years from February 2008. The incentives offered by the government included refund of Value Added Tax (VAT) and Central Sales Tax (CST) for 21 years from the date of commercial production, with conditions and additions. Production started in 2010. Gross output VAT for sales within the state was 14.5 per cent and the CST was two per cent on interstate sale.

With the changed business model, the manufacturing company started selling all its products to their marketing companies within the dated. The two marketing arms sold it both within the State and outside and also gained incentives, the state alleged.

The government changed the tax regulation with retrospective effect and issued an order authorising RNAIPL, the manufacturing entity, as a single nominee to receive the fiscal incentives under the agreement. The company challenged this in the high court.