Link: 1. The Public Price of Success
Link: 2. OTHER FACTS ABOUT NOKIA
Link: 3. Nokia SEZ: Public Price of Success
The Tamil Nadu government is using public money to help mobile phone giant Nokia, which has set up a telecom manufacturing special economic zone (SEZ) at Sriperambudur near Chennai.
The 'help' is in the form of reimbursement of value- added tax (VAT) that the Finnish multinational has to pay on phones sold in the domestic market in the SEZ meant for exports. The clause of reimbursement of VAT was included in the memorandum of understanding (MoU) the state had signed with Nokia in July 2005. This and several other fiscal incentives are in addition to concessions that Nokia gets under the SEZ scheme.
The total refund of VAT is assessed at over Rs 650 crore so far - this is almost equal to Nokia's investment in this factory.
The details of the deal, which had remained shrouded in mystery till now, have become available through the Right to Information (RTI) Act at the end of a three-year long battle waged by Chennai-based Citizens' Research Collective.
The special tax- break that TN gives to Nokia is two- fold - refund of taxes paid on phones sold within the state, and refund of VAT paid in other states. The clause relating to TN taxes reads, "All sales from the SEZ to domestic tariff area (DTA) shall attract applicable local sales tax (LST) and central sales tax (CST), as the case may be. However, the LST (including surcharge, re- sale tax, turnover tax, etc.) and CST so paid will be refunded to Nokia by the state government.
A suitable mechanism would be worked out to enable Nokia to get the refund every month without any loss of time. Such output LST and CST will be refunded to Nokia for a period of 10 years from the date of commercial production." On refund of VAT, the agreement reads, "Sales from the SEZ to the DTA will be liable for VAT and CST. Such VAT and CST will be refunded to Nokia by the state government in terms of the mutually agreed mechanism for the residual period (10 years minus period for which waiver availed in the pre-VAT scenario)."
However, these refunds cannot exceed "the investment made by Nokia in eligible fixed assets within three years of signing of MoU." When contacted for comment, communication officials of Nokia said authorised spokesperson was not available for comment. Another communication person merely said, "The MoU is a confidential and classified document." The VAT in different states ranges from four to 12.5 per cent. Even if it is taken at four per cent, the reimbursements to Nokia would be very large given the company's leadership position in the Indian handset market. The company's sales in India were worth Rs 3,578 crore during 2007-08.
"This means the TN government would have paid Rs 143 crore as VAT refund to Nokia for this year. It is not known how much of Nokia's sales are in TN compared to the entire country.
But if we assume it is about six per cent as proportionate to the total population of India, Rs 134 crore becomes the public price paid for the privilege of having Nokia in TN during this particular year," Citizens' Research Collective pointed out in its report released on Wednesday.
"In effect, the TN government has offered Nokia to pay for its investments and allow sales in the world's fastest growing mobile phone market," the report said.
Link: 2. OTHER FACTS ABOUT NOKIA
Link: 3. Nokia SEZ: Public Price of Success
The Tamil Nadu government is using public money to help mobile phone giant Nokia, which has set up a telecom manufacturing special economic zone (SEZ) at Sriperambudur near Chennai.
The 'help' is in the form of reimbursement of value- added tax (VAT) that the Finnish multinational has to pay on phones sold in the domestic market in the SEZ meant for exports. The clause of reimbursement of VAT was included in the memorandum of understanding (MoU) the state had signed with Nokia in July 2005. This and several other fiscal incentives are in addition to concessions that Nokia gets under the SEZ scheme.
The total refund of VAT is assessed at over Rs 650 crore so far - this is almost equal to Nokia's investment in this factory.
The details of the deal, which had remained shrouded in mystery till now, have become available through the Right to Information (RTI) Act at the end of a three-year long battle waged by Chennai-based Citizens' Research Collective.
The special tax- break that TN gives to Nokia is two- fold - refund of taxes paid on phones sold within the state, and refund of VAT paid in other states. The clause relating to TN taxes reads, "All sales from the SEZ to domestic tariff area (DTA) shall attract applicable local sales tax (LST) and central sales tax (CST), as the case may be. However, the LST (including surcharge, re- sale tax, turnover tax, etc.) and CST so paid will be refunded to Nokia by the state government.
A suitable mechanism would be worked out to enable Nokia to get the refund every month without any loss of time. Such output LST and CST will be refunded to Nokia for a period of 10 years from the date of commercial production." On refund of VAT, the agreement reads, "Sales from the SEZ to the DTA will be liable for VAT and CST. Such VAT and CST will be refunded to Nokia by the state government in terms of the mutually agreed mechanism for the residual period (10 years minus period for which waiver availed in the pre-VAT scenario)."
However, these refunds cannot exceed "the investment made by Nokia in eligible fixed assets within three years of signing of MoU." When contacted for comment, communication officials of Nokia said authorised spokesperson was not available for comment. Another communication person merely said, "The MoU is a confidential and classified document." The VAT in different states ranges from four to 12.5 per cent. Even if it is taken at four per cent, the reimbursements to Nokia would be very large given the company's leadership position in the Indian handset market. The company's sales in India were worth Rs 3,578 crore during 2007-08.
"This means the TN government would have paid Rs 143 crore as VAT refund to Nokia for this year. It is not known how much of Nokia's sales are in TN compared to the entire country.
But if we assume it is about six per cent as proportionate to the total population of India, Rs 134 crore becomes the public price paid for the privilege of having Nokia in TN during this particular year," Citizens' Research Collective pointed out in its report released on Wednesday.
"In effect, the TN government has offered Nokia to pay for its investments and allow sales in the world's fastest growing mobile phone market," the report said.
Guess TN Government will get a share from Nokia Lumia sale.
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