Jabalpur auto parts makers facing tough times

BS reported that Jabalpur based small scale manufacturers and suppliers to public sector undertaking Vehicle Factory Jabalpur are facing extinction. There are 35 to 40 vehicle parts manufacturers in Jabalpur. These are now facing biggies like TATA and Ashok Leyland vendors.

The manufacturers said the state government had put the parts which they prominently manufacture for VFJ, under 5% value added tax category as a result of which they could not compete with outsiders.

Mr Arun Jain secretary of Mahakoshal Chambers of Commerce and Industry said that “Intra state sales attract 2% central sales tax while inter state sales of vehicle parts attract 5% VAT. We cannot compete even with manufacturers of the neighboring states.”

Mr Jain added that “The combined turnover of all manufacturer is hardly 20 crore to 30 crore. The VFJ manufacture all kinds of four wheelers for defense and places orders worth crore of rupees but our share have now reduced to 0.1% or less owing to tax disparity.”

Mr Ravi Gupta president of Jabalpur Laghu Udyog Sangh said that “The high rate of VAT has pushed us in the red. We have become uncompetitive against outside bidders in VFJ and other ordnance factories. The outside suppliers are issued Form C and thus, it attracts only 2% central sales tax. High rate of VAT on raw material, non availability of raw material and additional burden of entry tax has put us in loss making zone.”

He added that “The manufacturers are also under tight squeeze owing to shrinking orders as TATA and Ashok Leyland vendors have signed a deal with the VFJ to supply parts. The VFJ has discontinued trucks like Shaktiman, Nisan and Jonga jeep and has started making new models like Stallion and LPTA as a result the local manufacturers have few orders. Also they ask the suppliers to get their parts approved by TAAT and Ashok Leyland why will they approve local manufacturers part?.”

State Finance Minister Raghavji said that “The state government cannot reduce VAT from 5% to 2% as of now but in the future will discuss with VFJ officials so that local manufacturers may get orders.”

(Sourced from http://www.steelguru.com/news/index/2009/09/29/MTEzNzA4/Jabalpur_auto_parts_makers_facing_tough_times.html)