Explained: Why has the government rejected Tesla proposal for tax breaks?

Key Highlights

• The government has rejected an application by Tesla Inc., located in the United States, for tax benefits, citing the company's lack of a comprehensive plan for domestic vehicle manufacturing.
• According to senior government officials, the firm's proposal did not include a production facility for electric vehicles.
• On the same day, West Bengal's Minister of State for Minority Affairs and Madrasah Education tweeted, "Drop here, West Bengal has the best infrastructure, and our leader @MamataOfficial has vision."

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The government has rejected an application by Tesla Inc., located in the United States, for tax benefits, citing the company's lack of a comprehensive plan for domestic vehicle manufacturing. Senior government officials stated that the position was formed because the automaker was requesting a tax break only for importing fully constructed vehicles into the nation, without making an imminent or firm proposal to establish a domestic manufacturing facility in India.

Why has India rejected Tesla's application for a duty reduction?

According to senior government officials, the firm's proposal did not include a production facility for electric vehicles. The government's principal concern was that the corporation sought tariff reductions and subsequently proposed domestic manufacturing contingent on the country's sales reaction. As a result, the tax cut demand did not gain traction, as it was assumed that other corporations would seek similar concessions.

"Tesla is seeking reductions in import duties. They are invited to visit and produce. However, his reasoning is that he wants to see how many people in India purchase his vehicle first. For that, he requires a lower customs duty. If there is sufficient turnover, I may come. This is not a poor man's vehicle. They are not manufacturing a small electric vehicle that is affordable for the middle class. They are developing a supercar. Why should we provide a duty-free status? Please pay the duty and take it if you can afford it, "a top government official told The Indian Express.

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What was Tesla's request for a duty reduction? How have state governments reacted?

Tesla wrote to the ministries last year requesting a reduction in import tariffs on fully completed vehicles.

At the moment, customs duty on automobiles imported as completely built units (CBUs) varies between 60% and 100%, depending on the engine size and cost, insurance, and freight (CIF) value of less than or greater than $40,000.

Following Tesla creator Elon Musk's statement last month that difficulties with the Indian government were impeding the debut of Tesla's electric automobiles in India, numerous state government leaders urged Musk to establish a presence in their respective territories.

Musk responded to a Twitter user who urged him to launch Tesla vehicles in India on January 13 by tweeting, "Still working through a lot of problems with the government."

The following day, Telangana Cabinet minister KT Rama Rao tweeted: "Hey Elon, I am the Telangana state's industry and commerce minister. I will be delighted to collaborate with Tesla in overcoming the obstacles to establishing a presence in India/Telangana. Our state is a leader in sustainable development efforts and is a premier business destination in India. "

On the same day, West Bengal's Minister of State for Minority Affairs and Madrasah Education tweeted, "Drop here, West Bengal has the best infrastructure, and our leader @MamataOfficial has vision." Bengal is synonymous with business: "

The following day, Maharashtra's Cabinet minister, Jayant Patil, who also quoted Musk on Twitter, wrote: "Maharashtra is one of India's most progressive states. We will provide you with all the assistance required in Maharashtra to build your business in India. We cordially invite you to locate your industrial facility in Maharashtra. "

The flood of states contacting Musk came to an end with Punjab Pradesh Congress Committee and Punjab MLA Navjot Singh Sidhu writing on Twitter: "I invite @elonmusk, Punjab Model will establish Ludhiana as a hub for electric vehicles and battery industry with time-bound single window clearance for investment that brings new technology to Punjab, creates green jobs, and walks the path of environmental preservation and sustainable development."

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