Ford India owes ₹602.3 cr as deferred sales tax liability: Report

American auto major Ford Motor Co. has announced that it will shut down manufacturing operations in India due to the huge losses suffered by the company. Now, a study by credit rating agency India Ratings and Research claims that the car brand owes 602.3 crore as deferred sales tax liability in India.

(Also read: How Ford India plans to compensate dealers after exit? FADA seeks clarity)

Ford India’s unguaranteed foreign debt was largely in the form of deferred sales tax liability of whom, the study said. 602.3 crores.

Ford India has two manufacturing facilities in India, one at Chennai in Tamil Nadu and the other at Sanand in Gujarat. While setting up the plant in Chennai, Ford India received tax incentives such as sales tax exemption from the Tamil Nadu government. The company has also got similar tax incentives in Gujarat.

Apart from vehicle assembly in India, Ford also has engine manufacturing facilities in the country. The company said in an announcement on 9 September that it would discontinue vehicle assembly at Sanand by the fourth quarter of 2021. Also, it will shut down the vehicle and engine manufacturing facilities in Chennai by the second quarter of 2022. However, it will continue to operate the engine production plant at Sanand.

According to news agency IANS, the automaker is working with relevant government agencies to restructure its business. It also said that the company is thankful to the Tamil Nadu and Gujarat governments for their support.

The study claims that Ford India has a strong legal relationship with its parent conglomerate Ford Motor Company. The latter has increased the corporate guarantee to 85% of the earlier sanctioned working capital facilities at the end of FY21. Most of the automaker’s future external debt is expected to be backed by a guarantee from Ford Motor Co.

The credit rating agency also said that Ford Motor Co. 8,748 crore in Ford India since its inception. In addition, Ford Motor Company is supporting its Indian subsidiary through intercompany loans. 4,396 crore in FY21.

The automaker’s announcement of shutting down manufacturing operations in India came as a blow to the Made in India campaign. However, for the past few years there was speculation about this announcement.

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