Tax sops for Honda plant okayed

The State Cabinet on Friday approved Value Added Tax (VAT), Central Sales Tax (CST) and land registration fee concession to Honda Motorcycles and Scooters India Ltd (HMSI) for its manufacturing plant at Narasapura in Kolar district.

In return, HMSI, a wholly-owned subsidiary of Honda Motor Company, Japan, will have to select 85 per cent non-technical employees from among the local population, Law Minister Suresh Kumar told reporters after the Cabinet meeting.

HMSI is investing Rs 1,300 crore for the facility which will become operational in the first half of 2013 with an annual production capacity of 18 lakh units.

The company has indicated that it would provide jobs to  3,200 persons. The plant also has an indirect employment creating capacity of 15,000. The foundation for the plant was laid in last September by Chief Minister D V Sadananda Gowda.  Suresh Kumar said 40 per cent of the VAT payable by HMSI for the next ten years will be converted into interest free loans. It will be repayable from the year 2022 for the next 10 years.

The government would reimburse 95 per cent of the CST to the company for a period of five years. It would also exempt the company from paying stamp duty and registration fee for registering the land. The company has been allotted 96 acres of land by the Karnataka Industrial Area Development Board at Narasapura.

In return, the State government has imposed the condition that 85 per cent of its non-tech employees will have to be selected from the local population.

Replying to queries, Suresh Kumar said the government will put in place a monitoring mechanism to ensure that the company sticks to its promise on employing local people.

“If the conditions are not followed, we will not hesitate to withdraw the tax concession”, he claimed. Suresh Kumar said the concessions approved by the Cabinet will also be placed before State High Powered Clearance Committee headed by the chief minister.

The Kolar plant is HMSI’s third manufacturing facility in India and first in the South. Once the new plant becomes operational HMSI’s total annual production capacity will go up to 36 lakh units per annum, including 16 lakh units at its first plant at Manesar, Haryana, and 12 lakh  units at its second plant in Tapukara (Rajasthan). 

HMSI’s current product line-up includes three automatic scooters (Activa, Dio and Aviator) and six motorcycles (CB Twister, CBF Stunner, CB Shine, CB Unicorn, CB Unicorn Dazzler and CBR 250R).

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