AP reduces VAT on auto parts

State Investment Promotion Board clears four investment proposals two of which are in the automotive sector

The Andhra Pradesh government has reduced the value added tax (VAT) rate on auto components to 5 per cent from the existing 14.5 per cent to expand the automotive manufacturing base in the state.

The decision comes on a day the State Investment Promotion Board (SIPB) headed by chief minister N Kiran Kumar Reddy cleared four investment proposals of which two are in the automotive sector.

Industry minister J Geeta Reddy on Friday said the reduced VAT rate would apply to the components manufactured in AP only.

The SIPB has cleared a Rs 300-crore investment proposal made by Mahindra & Mahindra for setting up of a new 4-wheeler transport vehicle plant at its existing facility at Zahirabad here, according to the minister. Mahindra had recently inaugurated its 100,000-unit capacity tractor manufacturing facility and is also in the process of developing an auto ancillary park at Zahirabad in partnership with its existing supplier firms.

The board also cleared the Rs 1,500-crore pick-up truck and sports utility vehicle manufacturing plant proposed to be set up at Sri City industrial park by Isuzu Motors. Last month, Isuzu had signed an MoU with the state government for the proposed manufacturing plant, under which the government had agreed for a VAT reimbursement in proportion to the investment committed.

The government cleared two more proposals with a proposed investment of Rs 600 crore at today's meeting.

SIPB normally considers those investment proposals that seeks government incentives over and above what has been proposed in the industrial policy. The SIPB also made medium density fibre boards, particle boards and their products as eligible for incentives under the industrial promotion policy.

In talks with PepsiCo, Cadbury
The minister said the government was working on some large private investment plans, including a Rs 2,000- crore proposal by PepsiCo and a Rs 2,500-crore proposal by Cadbury. PepsiCo has come forward to set up a food and beverages plant at Sri City while Cadbury is planning to set up a biscuit and chocolate manufacturing facility near Hyderabad.