HMSI to Get Tax Benefits for its Karnataka Plant

The Karnataka government yesterday approved tax benefits plan for HMSI (Honda Motorcycle & Scooters India ltd) upcoming plan at Naraspur Industrial Estate in Kolar district, about 52 Kms from Banglore. HMSI is going to invest Rs. 1,300 crore with an annual capacity of 1.8 million units. Under this tax benefits plan the state government will convert 40% of the eligible gross value added tax (VAT) generated by unit in interest free loan and that loan amount will be repaid in 10 equal installment commencing from 11^th year. Apart from this the government will reimburse 95% of the central sales tax (CST) for the initial five years.

The government will also give 100% exemption from stamp duty, concessional charges for registration of loan and loan documents, exemptions from electricity duty for five years (for purchases from ESCOMs or generated through captive sources for self-consumption). Apart from that the unit will also get 100% exemption from payment of entry tax on plant & machinery and capital goods for a period of three years and on raw material inputs for a period of 10 years.

However, these tax benefits are given on the condition that HMSI has to provide 85% job to the local people in all the departments. The company proposed that it will generate direct employment of 3,200 persons and indirect employment of 15,000 persons through this plant. The benefits will be taken back if the company fails to meet this criterion. The company got approval for this plant in July last year. The company has been allotted 96 acers land by the Karnataka Industrial Area Development Board (KIADB) at Narasapur. The state government said that the benefits are necessary to promote the backward area of Kolar district.

This is Honda’s third plant in India and first in South India beside Haryana and Rajasthan plant. The new plant will take HMSI total production capacity to 4 million units across the three plants and will help to reduce waiting period for Activa and other products. It seems like other manufacturer may also attract to this region given the tax benefits offered by Karantaka government.