Auto sector firms, Volkswagen, Mahindra and Bajaj have warned that they might be forced to move out their investments from the state of Maharashtra due to issues relating to Value Added Tax or sales tax at source.

The state government would loose Rs 4,000 crores of new investments from Mahindra alone, if the company decides to abandon the state over taxation disagreements with the authorities.

All the three firms, Bajaj, Volkswagen and Mahindra have set up facilities in Chakan, near Pune in the state. Dr Pawan Goenka, President of Automotive and Farm Equipment at Mahindra, has said that the company is planning a new phase of expansion and might have to move out of the state.

Dr Goenka also said that the company has taken up the matter with the state government, which has assured that they are finding a solution to the problem. Mahindra and Mahindra is planning to set up a new plant that will have a capacity to produce 250,000 units. Mahindra and Mahindra is India’s biggest sports utility vehicle maker by sales.

Maharashtra state government had changed rule for VAT set-offs last year. The new regulations say that the car manufacturers are only eligible for VAT set offs for vehicles that are sold in the state. The move has met stiff opposition from vehicle makers, who are now considering other locations to move their facilities.