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

US auto major Ford Motor Company has announced that it will stop manufacturing operations in India owing to the huge loss the company has incurred. Now, a study by credit rating agency India Ratings and Research claims that the car brand owes around 602.3 crore as deferred sales tax liability in India.

By: HT Auto Desk
| Updated on: 18 Sep 2021, 13:25 PM
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Ford's manufacturing operation closure in India comes as the latest blow to the Indian auto industry.
Ford's manufacturing operation closure in India comes as the latest blow to the Indian auto industry.

Also Read : How does Ford India plan to compensate dealers post exit? FADA seeks clarity

The study says that Ford India's unguaranteed external debt was largely in form of a deferred sales tax liability of 602.3 crore.

Ford India has two manufacturing facilities in India, one in Chennai of Tamil Nadu and another in Sanand of Gujarat. While setting up the plant in Chennai, Ford India received tax incentives like sales tax waivers from the Tamil Nadu government. In Gujarat as well, the company has received similar tax incentives.

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

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

The study claims that Ford India has strong legal linkages with its parent group Ford Motor Company. The latter has extended corporate guarantees to 85% of the former's sanctioned working capital facilities at the end of FY21. The majority of the automaker's future external debt is expected to be backed by a guarantee from Ford Motor Company.

The credit rating agency also said that Ford Motor Company has infused equity of 8,748 crore in Ford India since its inception. Besides that, Ford Motor Company has been supporting its Indian subsidiary through intercompany loans amounting to 4,396 crore in FY21.

The announcement of manufacturing operation closure in India by the automaker came as a blow to the made in India campaign. However, the announcement was speculated for the last couple of years.

First Published Date: 18 Sep 2021, 13:25 PM IST
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