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Old 1st December 2017, 20:58   #16
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Default Re: Nissan sues India over outstanding dues

@deehunk, I know only what the article mentions.

I will have to go through the particular document which promises them the aforementioned 29 billion rupees in incentives.

But, if the TN govt official says that the figure is correct, that leaves little for a debate.

About the lacklustre attitude towards the customers or models it introduced, I really don't think that their plan to recover their investment was through the incentives and by not selling cars.

If I simplify it, if I am investing 10 rupees in a business and I know that I will be getting 2 rupees back from the Government for next year, I will take that into account and aim to gather the remaining 8 rupees to fund my operations.

If I don't get my two rupees back, I will call them, meet them, once, twice, five times, ten times, approach the PM, warn about going to court and then I will go to court.

Which is exactly, what appears happened here.

Now, I won't indulge in 'what about'ism about how did I spend my first 10 rupees or how do I plan to gather and invest my remaining 8 rupees for the next year. That is separate.

If they promised me two rupees, they should give me my two rupees.

Otherwise, I will tell the world how big a cheat they are. Which also, appears happened here.
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Old 1st December 2017, 21:47   #17
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Default Re: Nissan sues India over outstanding dues

Nissan's business and RoI model, questionable as it may be, is an entirely separate discussion and irrelevant to this thread.

This is about honoring a commitment already a couple years overdue, and is adding further substance to the policy inconsistency situation in India. Business is driven by hard facts, and no amount of appeasing rhetoric is going to cover for shoddy policy.

Whatever is the fair outcome, it needs to be arrived at quickly and professionally. Investor confidence is at stake.

Last edited by Chetan_Rao : 1st December 2017 at 21:48.
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Old 1st December 2017, 22:15   #18
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Default Re: Nissan sues India over outstanding dues

Not always does one have to wear patriotism on the sleeve.Lets look at this rationally.

When Nissan was going to setup a plant here in India a lot of states were wooing for that investment.Nissan chose Tamilnadu.If Tamilnadu does not honor the commitment given,then Nissan has every right to feel aggrieved.
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Old 1st December 2017, 22:35   #19
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Default Re: Nissan sues India over outstanding dues

Along with free land and power and water at fixed and lower rates, many state governments offer sales tax incentives to large greenfield units.

This incentive regime creates a situation where big companies "shop around" in search of better deals. This also offers some room for corruption and favoritism from the politicians and bureaucrats. Further, long term and sustainable benefits to the concerned state from such deals are often questionable.

Land, power, water, wages etc. are basic factors of production and a company is perfectly justified in scouting for better deals on these factors. Ease of doing business may also influence the choice of an investment destination.

But it is not an ideal business model for an enterprise to rely on tax incentives rather than 'real' profits generated from actual sales income when setting up a unit.

However, once a promise is made, it is better that the Government sticks to it, for the sake of credibility.

So let the Government allow Nissan to deduct whatever incentives that is contractually due to them from Nissan's future GST burden. That way, Nissan will not be able to scuttle their India operations and salvage some of their investment through "incentive monetization".
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Old 1st December 2017, 22:43   #20
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Default Re: Nissan sues India over outstanding dues

I’m surprised by the number of members going after Nissan in this case. Unfortunately, this is the reality of India - tax terrorism is a very apt term.

My work involves analysing balance sheets of many corporates including MNCs operating in India - I have yet to notice a balance sheet where there doesn’t exist an outstanding claim from tax authorities on these companies, and if any incentives are due, these are never paid on time or in full. This is true for Volkswagen as well, it’s true for Hyundai, etc etc.

While some corporates will grease palms to get these payouts (thereby encouraging this kind of conduct), it is heartening that Nissan has not taken this approach. The TN and GoI need to pay up, and quickly to resolve this.

Unfortunately what we might see eventually happening is what some of the members above are suggesting - spurious investigations being opened up by the government into Nissan’s operations, to avenge this embarrassment.

Last edited by phoenixash : 1st December 2017 at 22:44. Reason: Typo
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Old 1st December 2017, 23:19   #21
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Default Re: Nissan sues India over outstanding dues

I think people who are doubting or blaming Nissan are getting patriotic &/or are unware of how these incentives are expected to work.

The incentives not only helps the company but also help govt keep up their promises of creating jobs and boosting economy in their state. So its a two way street with more benefits for the state because even if Nissan fails to make any profit, the state still gets more employment and boost to its real estate sector.

Also India is known to go back on their promise and that has been the biggest deterrent for many big players. This case is not a stand alone one either, there are many such and only the big corporations dare to fight the government rest just take their loss and suffer.

Here is an example, a few years ago the Govt decided to incentivise all companies investing in Solar energy panels to buy energy from them at a given price, this was a good price to encourage people to invest in expensive solar panels back then. After 2 years the cost of the Material came down significantly so more companies got involved and projected plans to recover their investment sooner than the companies which started at beginning due to the good buy back price & lower cost.
The GOI realized this and said they will lower the price at which they buy from all the providers(new & old). Sounds fair? Not really, this is fair only for the folks who got panels for cheap but the companies who invested heavy amounts did so with expectation of recovering money in next few years and with lowering of the price their recovery period just got extended by a couple of more years. This is unfair and they are right now fighting to to restore the buy back price but so far nothing has happened.

There are many such cases.

India will have to work really hard to get rid of this image.

Last edited by Technocrat : 1st December 2017 at 23:22.
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Old 2nd December 2017, 00:12   #22
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Default Re: Nissan sues India over outstanding dues

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Originally Posted by Technocrat View Post
The incentives not only helps the company but also help govt keep up their promises of creating jobs and boosting economy in their state.
That is why State Governments offer incentives on indirect taxes. A company makes an investment in a State, it contributes to the economy of that State, and the State rewards it by offering tax incentives. Sales tax is due on actual sales, so only if the company is engaged in real economic activity, does it get any benefit.

Quote:
Originally Posted by Technocrat View Post
So its a two way street with more benefits for the state ...
Quote:
Originally Posted by Technocrat View Post
... if Nissan fails to make any profit, the state still gets more employment and boost to its real estate sector.
How "more" does any State benefit in actual terms from such investments is debatable, but in the present case, as the concerned State Government already made a policy decision at the time of offering Nissan incentives, it is not appropriate for the Government to rethink it now.

The Government should ideally keep its word it gave to Nissan.

Quote:
Originally Posted by phoenixash View Post
...this is the reality of India - tax terrorism is a very apt term.
Quote:
Originally Posted by phoenixash View Post
spurious investigations being opened up by the government into Nissanís operations, to avenge this embarrassment.
Tax authorities are an aggressive lot in almost every country, including the US, France and Germany. Companies doing business in multiple countries are very well aware of this and have extensive and elaborate mechanisms to ensure tax compliance.

Quote:
Originally Posted by Technocrat View Post
Also India is known to go back on their promise and that has been the biggest deterrent for many big players.
Quote:
Originally Posted by phoenixash View Post
This is true for Volkswagen as well, ...
How our politicians and bureaucrats are willing to bend backwards when a name of a big MNC is invoked may be read here:

http://indiatoday.intoday.in/story/d.../1/193685.html

This was a case of fraud, but still it is an indicator on how murky this business of "incentive shopping" by big companies can get.


Real entrepreneurship is not fueled by incentives, tax breaks and preferential treatment. Such bubbles will not last long, and banking on them alone is not a sustainable business model.

However, in the case of Nissan, it appears that the Government has indeed renegaded on its promises. That is not how things should be run in the State's end, either. If a State does not keep it word, then that reflects poorly upon its people.
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Old 2nd December 2017, 00:51   #23
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Default Re: Nissan sues India over outstanding dues

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Originally Posted by sajo View Post
I completely agree with you Deehunk, the whole case and the compensation amount seems highly suspicious. With the Micra being produced in India being phased out in most of its export markets, and no other significant products in the pipeline, Nissan India is probably looking at excuses to wind up their India operations.
If there were tax breaks promised , and even if they are entitled to receive 100% refund of taxes paid so far, have they really paid Rs.5000 crore to the state exchequer ?
The state govt has been sitting on the file more than 2 years.

The center had turned a deaf ear to Nisan's pleas.Even a plea by the company's chairman, Carlos Ghosn, to PM Modi in March of last year seeking the center's assistance did not yield any result .The company did not have any option other than to seek legal recourse to recover their dues.

So much for ''Make In India'' Initiative.

Waseem.
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Old 2nd December 2017, 00:52   #24
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Default Re: Nissan sues India over outstanding dues

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Unfortunately what we might see eventually happening is what some of the members above are suggesting - spurious investigations being opened up by the government into Nissan’s operations, to avenge this embarrassment.
As Yeldo suggested, let the Government allow Nissan to deduct whatever incentives that are contractually due to them from Nissan's future GST burden.

I have nothing against Nissan to go after them, but they are under observation in Europe for violating emission norms. Nissan cars are among the highest polluters after their partner Renault in Europe.

Earlier this year South Korean court ruled against Nissan for cheating emission tests. I have quoted these examples to highlight Nissan's credibility and not to defend the lapse of GOI. I spot so many new Micras and Sunny(Taxi's) on road emitting smoke every day, it is hard to believe that they are BS-4 compliant. If Nissan follows a clean business model and has a genuine case against the GOI, let them fight in the court.

Last edited by deehunk : 2nd December 2017 at 01:21.
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Old 2nd December 2017, 00:57   #25
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Default Re: Nissan sues India over outstanding dues

I'll try drawing a relevant parallel to a consumer purchase most of us can relate to:

One buys something at a discount, say a substantial cashback is offered on an expensive cellphone (that one may not buy without the incentive), payable a certain time down the line. When the time arrives, the seller/financial institution refuses to honor the cashback, quoting reasons not mentioned in the initial purchase agreement, or simply because they know they now have a captive customer who has already invested a significant sum and can't undo it without significant losses.

Would/should the consumer be happy with this? Would/should they try to rationalize this by thinking they should've used the cellphone more, to offset the loss of the incentive through increased productivity? Would/should they entertain arbitrary arguments that the cashback is not applicable because of how the cellphone was/wasn't used? Or should they demand that the initially agreed terms be honored?

Nissan is the customer here, and the govt. sold them the discounted cellphone.

P.S. Before someone points out the obvious, yes it's an extreme simplification of a complex taxation situation, but it provides a contextual basis we can relate to.

Last edited by Chetan_Rao : 2nd December 2017 at 01:13. Reason: Grammar and rephrasing
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Old 2nd December 2017, 01:01   #26
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Default Re: Nissan sues India over outstanding dues

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Originally Posted by Yeldo View Post
How "more" does any State benefit in actual terms from such investments is debatable, but in the present case, as the concerned State Government already made a policy decision at the time of offering Nissan incentives, it is not appropriate for the Government to rethink it now.

The Government should ideally keep its word it gave to Nissan.

However, in the case of Nissan, it appears that the Government has indeed renegaded on its promises. That is not how things should be run in the State's end, either. If a State does not keep it word, then that reflects poorly upon its people.
Agree on all points.

Quote:
Originally Posted by deehunk View Post
As Yeldo suggested, let the Government allow Nissan to deduct whatever incentives that are contractually due to them from Nissan's future GST burden.

I have nothing against Nissan to go after them, but they are under observation in Europe for violating emission norms. Nissan cars are among the highest polluters after their partner Renault in Europe.

Earlier this year South Korean court ruled against Nissan for cheating emission tests. I spot so many new Micras and Sunny(Taxi's) on road emitting smoke every day, it is hard to believe that they are BS-4 compliant.
Lets not mix things, Nissan should get paid on what they were promised. If they broke any of the rules as per the agreement then the applicable provisions of contract should be used. What is happening out of this context and country should not be consideration while giving Nissan its dues.
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Old 2nd December 2017, 10:46   #27
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Default Re: Nissan sues India over outstanding dues

I am sharing a part of the statement given to media by a TN state government official,

A state government official said that the Nissan officials are “confusing” the terms of 2008 Memorandum of Understanding (MoU). The company has claimed it to be a dispute under the Comprehensive Economic Partnership Agreement, which is an agreement between India and Japan signed in 2011. An official explained that the agreement to set up the plant in Chennai was much older, dated 2008. “We are governed by our own MoUs. So any arbitration should happen only in Chennai,” he said.

Another aspect the official said the company is “confusing” is that they expect the state government to immediately reimburse the commercial tax paid by the company. “Our (promised) incentives are not refund based. If they think they must immediately get back whatever they paid, we may very well have given them tax holidays,” said the official.

He said as per the agreement, the incentive would be paid back over a period of 21 years, the time frame for the agreement. “Our fear is if we repay them the total money in just a few years, they (Nissan) are free from us and they can stop supporting the ancillary units or providing employment. They can even shift the plant to some other place. We will pay them up to 115% of their investment, but over a period of 21 years,” he said.

The state government approach, which is said is purely based on the terms of the MoU, is to ensure the company stays for 21 years and provides employment. The officials said the state government’s case is very strong and in fact, Tamil Nadu had already paid Nissan around Rs 1,600 crores, while the total investment made by the company was around Rs 4,000 crores.

The full report is available at this link,

http://www.newindianexpress.com/busi...s-1716273.html

Last edited by deehunk : 2nd December 2017 at 10:47.
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Old 2nd December 2017, 11:46   #28
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Default Re: Nissan sues India over outstanding dues

Assuming what the TN official claims in the report is true (Nissan misunderstanding the MoU's T&C governing the incentives), it raises the question why two years of discussions didn't succeed in clarifying something that 'simple'?

I'm hard pressed to believe a huge corporation would go as far as international arbitration if the case against them was such a slam dunk as being claimed by TN authorities. Corporates may be greedy (among a host of other negatives), but they ain't stupid to start/contest an unwinnable case.

There's more to this mess than either side is revealing, and the optics is bad no matter who wins.

Last edited by Chetan_Rao : 2nd December 2017 at 11:49.
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Old 2nd December 2017, 12:20   #29
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Default Re: Nissan sues India over outstanding dues

I am reading all available information about this issue, the TN government refunded IPS dues to Nissan earlier this year. They rejected Nissan's demand to refund value-added tax refund of close to Rs 2,000 crore, later Nissan escalated the matter to Union Commerce Ministry.

The dispute arises here, the manufacturer can claim VAT refund for the sale of products made in a state and sold within the state boundaries. In this case, Nissan is claiming VAT refunds for sales within TN. Check the below link,

https://www.thequint.com/tech-and-au...tax-incentives

Nissan has maintained that it is a routine claim. The state government has rejected Nissan's claim, on the grounds that the company was claiming tax benefits for cars exported as well. So, Nissan has to prove that their demand for refund of is proportional to their total sales within TN in the affected period.

I and Sajo were trying to prove this point since yesterday. I too feel sad that the whole incident has generated negative publicity against India.

Last edited by deehunk : 2nd December 2017 at 12:22. Reason: Add link
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Old 2nd December 2017, 12:50   #30
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Default Re: Nissan sues India over outstanding dues

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... in fact, Tamil Nadu had already paid Nissan around Rs 1,600 crores, while the total investment made by the company was around Rs 4,000 crores.
40% of the original investment as incentives?

Wouldn't be that considered as a subsidy?

Is there any chance by which the pricing of units exported by Nissan India be under the scanner in their target markets for being indirectly subsidized?
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