The state finance department has taken an aggressive stand, saying the government should not succumb to auto companies, while other departments say the issue needs to be revisited to arrest the fall of investment to the state.
Instead of a VAT set-off claimed on a gross sales basis, auto companies were asked to claim in on a net sales basis from April 1, 2011, a move which has been objected to by the automobile industry.
According to critics of the government's move, the amendment is a blow to the auto makers, which are now preferring other states over Maharashtra for new projects.
Mahindra and Mahindra has recently announced its decision to invest in Tamil Nadu, while Maruti Suzuki India, Ford India and Volkswagen have chosen Gujarat, not Maharashtra.
Incidentally, Union Agriculture Minister and Nationalist Congress Party chief Sharad Pawar criticised the state government for losing investments to other states and not keeping continuity in the decisions taken in the past on incentives.
A senior government official, who did not want to be identified, told Business Standard: "If the government retracts, it will have to bear the burden of at least Rs 7,000 crore (Rs 70 billion)
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