Nissan,TN agree to settle Rs 5,000 crore tax dispute out of court

The dispute cropped up after Nissan alleged that Tamil Nadu had not paid certain incentives under a 2008 agreement to set up a car manufacturing plant at Oragadam near Chennai. Nissan and its French partner Renault had invested Rs 6,100 crore in the facility that has the capacity to produce 4 lakh cars per annum.

By:August 27, 2020 10:04 AM

 

After agreeing to settle the $660-million (about Rs 5,000 crore) long-pending tax dispute with the Tamil Nadu government, Japanese auto major Nissan Motor on Wednesday withdrew its petition relating to the dispute from the Madras High Court.  The Tamil Nadu government also withdrew its petition seeking order for refraining Nissan from pursuing international arbitration proceedings that was initiated in 2016. Chief justice AP Sahi and justice Senthilkumar Ramamoorthy allowed the parties to withdraw the petitions after all the parties filed a joint compromise memo for withdrawal of the cases. Sources said Nissan is likely to receive around Rs 1,400-1,800 crore as per the agreement. While the state government is to continue to offer the incentives as promised, Nissan will give up its claims on the input tax credit, as part of the settlement, said sources.

The dispute cropped up after Nissan alleged that Tamil Nadu had not paid certain incentives under a 2008 agreement to set up a car manufacturing plant at Oragadam near Chennai. Nissan and its French partner Renault had invested Rs 6,100 crore in the facility that has the capacity to produce 4 lakh cars per annum. Consequently, Nissan initiated an international arbitration against India in 2016, claiming Rs 2,100 crore in unpaid dues and Rs 2,900 crore in damages and other costs.

Following that, Tamil Nadu had been trying to reach a settlement with Nissan for several years. Nissan had gone for arbitration by invoking the provisions of Comprehensive Economic Partnership Agreement (CEPA) between Japan and India. While the case was pending before the high court, the state government and Nissan began efforts to arrive at an out-of-court settlement and finally reached an agreement in May this year.

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