[Sankar]

But if tax incentives, promised earlier, don’t get paid up, especially to global brands like Nissan, this could hamper the chances of other manufacturers looking to set up shop in India going forward.

Hmm.. I don't think so. They need our market and resources.

[Motard_Blr]

Originally Posted by Sankar

Hmm.. I don't think so. They need our market and resources.

And we need the investment and the jobs that are created by that investment.

At least in Nissan's case, we need them more than they need us because they export a lot more than they sell locally. They do not seem to be taking local sales seriously so exports will remain their focus for the foreseeable future. Their exports go towards correcting the trade imbalance India has with the rest of the world.

Ford also has much larger exports than local sales. But I don't know if they have had any trouble with receiving incentives.

But for every Nissan, there's a GM where huge areas of land was allotted but the promised level of investment never came.

But the government changing the rules of the game as and when it pleases is bad for business.
The fundamental question is, would you trust someone who doesn't keep their word and honour their commitments?

[V.Narayan]

FDI, fiscal incentives, inter-country tax treaties mixed together make a very complex and heady tonic. Neither side will spell out the full case in the press and as almost always happens both sides have a case and both sides will have lapses and unmet qualifying requirements. Often times we bash up our Govt because we love doing that and I am no exception. A press report quietly released by Nissan does not make the Govt of TN guilty by itself. Corporations are usually way faster on the draw where media management is concerned than Govt departments can ever be. Having said that our bureaucrats are known to changing the goalposts unilaterally with feudal impunity. But unless we know a lot more of the details I'd say let's wait and watch what the arbitrator comes up with. The amount being so large is itself a hindrance. No bureaucrat wants to sign off these days on such large payments because of the anal lens of the Central Vigilance Commission and its sister organizations.

Originally Posted by Sankar

So they invested Rs61billion in setting up a factory and is now claiming back Rs.50billion plus interest?

Thank you.

Originally Posted by ashutoshb

Bad PR for India. And worst for the Make in India initiative.

Bad PR yes. As was the Vodafone case. But bad PR does not mean the defendant (GoTN)should not fight its case. The fact that multiple rounds of discussions have not closed matters is an indication of complexity and differing interpretations.

Originally Posted by DriverR

...as the outside world would be seeing us not in terms of states but as a country who has not kept its investment incentive promises.

While I respect your point of view it is not a conclusion I would draw because of one case.

Originally Posted by SILVERWOOD

There are over 20 cases pending against India, among the highest against any single nation.
https://auto.ndtv.com/news/nissan-su...illion-1782269

No disrespect to you. I went through the article. It seems to be the usual statement tossed up, without factual backing, common to our media. 20 of which type of cases is amongst the highest in the world - arbitration versus GoI? or tax disputes? or unpaid incentives? or disputes versus Japanese companies? How many arbitration cases or tax disputes does this journalist think would be lined up against Govt of USA or Govt of France. The press note is clearly a Nissan release and not a balanced report.

Sadly incidents like this give fodder to the western press and a poor image to us. Perception is reality.

[D33-PAC]

India isn't alone in this. Lack of honor in contracts/incentives/ government policies and actions not matching their promises is a reality world wide.

1.EU Commissioner chased Google for using smart tax-evasion techniques.
2. Nobody likes putting big money in Africa or South America because the government indulges in rule changes after you invest.

The world of big business is very scary for investors. This is also why Warren Buffett likes to only touch the USA. He knows what kind of headaches foreign operations inherit from the local system.


Having said that - Indian government is one of the biggest scares that's driving away investment. It's not once or twice - even if they're in the right in this case.

When you have someone like the Mumbai Airport owner GVK Reddy telling you he'll never invest in India again because his experience in the power-sector is bad, this is the kind of stuff that stifles job creation and prosperity at the hiring and employment level.

General Electric started making diesel trains for India and then the rail ministry cancelled their contract overnight for electric trains. Now GE's plant in UP is in jeopardy (not even finished).

Don't believe the hype of Modi's Make in India, blah blah blah. I've seen enough business to understand it's the entire collection of the bureaucratic gears right from the PM to the lowest guy in a state government's committees that have to change.

India is plagued with many problems from land acquisition to a court system that gives headaches to even the most successful industrialist.

I remember GVK Reddy saying " court if you go it takes 10 years 15 years 20 years meanwhile what happens ? people have lent money, people have put in money, people have took a risk, but I will never touch again in infrastructure even if you give me gold I won't touch because the experience is bad".

The scariest thing is the ripple effect something like this can have. All the big boys get together and get in touch with the consultancies worldwide, then that data is sold to all the big CEOs, and these are the faces that control billions in investment. The slightest level of apprehension and fear can stop thousands of jobs being created.

India isn't the only country, but I've seen it too often. They made F1 a headache to the point it left the country, they ruined Vodafone and Cairn, and even people who have had some remarkable success like GVK Reddy claim that they won't touch some areas again.

Very very scary stuff in a country where a million jobs need to be created every month.

[GTO]

The government should improve the investment environment for an industry that contributes so heavily to the GDP, investment & employment. This kind of news - coupled with bombshells every year (e.g. 2.0L diesel ban in the North) - makes CEOs nervous.

And let's not forget - Nissan is part of a group that includes Renault & Datsun, who have together created splendid facilities in India and sell 13,000 - 15,000 cars each month.

A promise is a promise. It must be honoured.

[vamsi.kona]

Originally Posted by prakash_ajp

I wish it does. GOI should understand that it can't make policies/changes arbitrarily. If it doesn't bode well to "make in India", then nobody else is to blame but GOI. Lot of damage was already done in the Vodafone case.

While I agree with the general thrust of your point about having a stable policy, in this particular case it wasn't GOI but rather Government of TN which is the primary party which had issues with Nissan or other way around. However, we can't conclude that the TN government is at fault without knowing the overall provisions of MoU.

[deehunk]

Originally Posted by vamsi.kona

However, we can't conclude that the TN government is at fault without knowing the overall provisions of MoU.

The jurisdiction for such legal battles is clearly highlighted in any MOU's, Nissan may have tried to hijack the issue by going to media. It is better to wait until the proceedings of the arbitration start in mid-December. The TN state government official has clearly mentioned that the refund will happen over a period of 21 years and any arbitration proceeding should happen in Chennai. There may still be some special provisions in the MoU under which Nissan is asking for refunds, so Nissan has to first prove that it is a legitimate claim.

[GTO]

TN moves HC against Nissan, says firm's claim exaggerated.

Source & Full Article

According to the state government, it was found that RNAIPL and NMIPL changed their business model from April 1, 2012.

In tune with it, RNAIPL was treated as manufacturer and NMIPL as a marketing firm, thus showing that the entire sales was effected within Tamil Nadu. This change affected the very purpose and object of the MoU, the government said.

A steep increase in the output tax during 2012-13 and 2013-14 led to certain queries.

By changing the business model, a product sold either by Renault or Nissan, gains input value and gets subsidy.

As regards some products, if sold to NMIPL, it may result in subsidy for input as well as on sales to consumers, creating a scope for enjoying double benefit of input as well as output value.

[deehunk]

I too read that Renault India manufactures vehicles and sells it to Nissan in one of the newspaper on Saturday, that's why the TN government disputes the refund claims by Nissan.

[Yeldo]

Originally Posted by GTO

Source & Full Article

One point in the article:

"The maximum subsidy (financial incentive/VAT refund) that can be paid was only around Rs 4,500 crore..."

"Invest and claim subsidy benefit" seems to the real 'business model' with such trumpeted projects. Manufacturing and selling something is merely "incidental and ancillary activity".

Makes an ordinary taxpayer / voter take a hard look at the investment promotion schemes promoted by various governments.

OT: With so many cases being filed in High Courts nowadays concerning arbitration proceedings, one can't tell the difference between arbitration and ordinary litigation !

[V.Narayan]

Glad to see the discussion is taking a more balanced turn instead of the 'our rotten dis-honourable Govt' versus 'them poor harassed MNC' approach. GTO, Yeldo, deehunk, vamsi.kona thank you for your news inputs and wisdom. ‎There are always two sides to a case and I am glad the other side is coming out now and revealing how a clever company can manage the media to its benefit.

Dear fellow BHPians, Forgive me for saying this - social media gives each of us unfettered power to communicate and reach thousands or lakhs of readers, in days, with our message. It behooves us T-BHP members to craft our words thoughtfully. Given the high standards of our forum and its opinion making power it is our responsibility to mull over what we have drafted before pressing the send button. I often find too many posts typed swiftly when the mind is agitated and without a moment to pause before firing it. ‎Trust me I am no lover of Govt departments but on such large cases my experience indicates the Govt usually treads the letter of the agreement. Too many of our posts are rants against any thing related to the Govt in India. It is my assumption (and I may be wrong) that the lesser we deal with the Govt intimately the more we fear it and the shriller our rant becomes.‎
‎
‎
Off topic - This thread referred to the Vodafone tax case and the GVK group both incidentally cases I am familiar with professionally. GVK I have empathy for but it is they who bid for Mumbai airport with a 37% (or around that) of revenues to be paid as royalty to the Govt for the concession. The seeds of failure were sowed at birth. You read right that's a percentage of revenue not net profit or even gross profit. Worldwide such airport royalties are ‎in the 12% to 15% range. As far as Vodafone is concerned with my familiarity beyond the news articles my empathy is entirely with the Govt. Their fault was learning as they went along and dealing with a buyer & seller who moved more nimbly. What our Govt asked for on tax is no different than what any Govt (America, Britain, France etc) would have demanded. Their stupidity was bolting the stable after the horse had fled and of course Vodafone won the trial by media.
‎
Apologies for preaching. ‎
‎

[prakash_ajp]

Originally Posted by V.Narayan

Apologies for preaching. ‎
‎

If you feel bad about it, then please don't!

Fact of the matter is, neither of us knows what the real issue is or who is right/wrong. So, in an ideal world, we don't talk about what is "sub judice". But going by that, we won't be able to talk about almost anything in this country, because nothing comes out of our courts for years.

Why, everyone knows how public contracts are won. I am sure there are honest corporate, but can't say the same thing about politicians, can we?

[deehunk]

Originally Posted by V.Narayan

Glad to see the discussion is taking a more balanced turn instead of the 'our rotten dis-honorable Govt' versus 'them poor harassed MNC' approach.‎

I agree with your views, the government unlike Corporates has to maintain a socio-economic balance to ensure smooth functioning of day to day activities irrespective of political parties in power. Otherwise, every investment will face the same fate as Tata's Siliguri plant.

[vamsi.kona]

Originally Posted by prakash_ajp

Fact of the matter is, neither of us knows what the real issue is or who is right/wrong. So, in an ideal world, we don't talk about what is "sub judice". But going by that, we won't be able to talk about almost anything in this country, because nothing comes out of our courts for years.

I believe Mr. Narayan's comment was more along the lines of 'Let us give both parties the benefit of doubt as we don't know the complete details' rather than 'Let's not talk since we don't know the details'.

Originally Posted by prakash_ajp

Why, everyone knows how public contracts are won. I am sure there are honest corporate, but can't say the same thing about politicians, can we?

I think this is quite a big question and the discussion would be beyond the rules of this forum and would get me infractions . However, I agree with you that the number of honest one's in both categories are a minority

[Yeldo]

Originally Posted by prakash_ajp

...we don't talk about what is "sub judice"

Would our discussions here possibly interfere with the due process of the case at bar? If so, how could the company- one of the parties in this case- take things public while the matter is still before the High Court?

Originally Posted by prakash_ajp

because nothing comes out of our courts for years.

We may blame our courts all we want, but tax disputes are not easy open and shut affairs anywhere in the world. Delaware, Singapore, London- everywhere normal company cases may be settled faster than in India, but tax litigation is a different thing altogether.

For instance, how lengthy it can get in Singapore if a company looks at "administrative negotiations" with Singapore IRAS is well known. IRS disputes in the US, or HMRC in UK can also get tough and lengthy and when compared to India, very very expensive.

Originally Posted by V.Narayan

Off topic - This thread referred to the Vodafone tax case... my empathy is entirely with the Govt. ... What our Govt asked for on tax is no different than what any Govt (America, Britain, France etc) would have demanded. ‎

Devious incentive claiming schemes and tax evasion strategies need be to stymied, especially in the case where cross border operations are concerned. Otherwise honest firms will find themselves at disadvantage and nobody will be left willing to walk the straight and narrow path. Everywhere in the world, governments are doing it, and only in India we find people actually blaming our government for doing its job, ie, collecting taxes that are due!

Originally Posted by prakash_ajp

... but can't say the same thing about politicians, can we?

I am in agreement, but for quite different reasons: I would rather suggest an inquiry into how such a large tax benefit vis-à-vis the original investment could be offered to any investor by the politicians and bureaucrats who concluded the deal.