States market ESDM policies to attract investors

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States that have come up with their electronics and IT policies are now vying with each other to woo investors. Let’s compare their policies and find out what benefits they offer to investors

By Srabani Sen

Saturday, September 07, 2013: Along with the Union government’s efforts to promote manufacturing of electronics hardware in India, states have also become proactive in developing their policies and are aggressively marketing them, domestically as well as globally. Frequent delegations, led by chief ministers, are visiting various countries like Japan, Korea, Taiwan, etc, to lure investors to start electronics manufacturing in their states.

On May 29, 2013, Kapil Sibal, minister for communications and information technology held a meeting with the chief ministers to seek their support in the ongoing efforts of the Central government to promote investment in the electronic systems design and manufacturing (ESDM) industry in India. He encouraged the states to come up with their own policies to attract investments in their states. The demand for electronics hardware in the country is projected to grow to US$ 400 billion by 2020, and this is a huge opportunity for the states to become ESDM hubs. Sibal emphasised that state governments can create a pro-investment environment and facilitate the availability of land, water, roads and training infrastructure in order to provide skilled manpower to support hi-tech manufacturing activities.

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Many states have already developed new policies or amended the existing ones in the last three years to make them more relevant and aligned with the Centre’s policies to promote electronics manufacturing in the country. While some states have brought in focused ESDM policies, others have developed information and communications technology (ICT)/information technology (IT) policies or amended their existing industrial policies.

ESDM policies: Andhra Pradesh (AP) and Karnataka have the strongest policies to promote electronics hardware manufacturing. In fact, AP and Karnataka have separate ESDM policies, which none of the other states have. Usually, states have ICT/IT policies or industrial policies, of which electronics hardware is a part. Also, the fiscal incentives of the AP and Karnataka policies are quite lucrative. Karnataka even offers the benefits of its industrial policies, apart from those of the ESDM policy.

Industrial policies: Madhya Pradesh (MP) offers benefits under two policies—Madhya Pradesh Industrial Promotion Policy 2012 (as amended in 2012) and the Madhya Pradesh IT Investment Policy 2012. Punjab and Maharashtra have also announced their industrial policies this year and Jharkhand did so in 2012. The former two states have approved a package of fiscal incentives for electronics hardware and IT. Haryana and Bihar also have their industrial and investment policies 2011, through which they offer incentives for electronics hardware manufacturing.

ICT policies: West Bengal (WB), Goa and Kerala have ICT policies. WB has included ESDM in the ambit of its IT policy, but Maharashtra’s policy is not very electronics centric, in terms of incentives. Uttar Pradesh (UP), on the other hand, has a strong IT policy but it has less lucrative incentives for the electronics industry.

States lagging behind: States like Gujarat, Rajasthan, Chhattisgarh, Odisha, Jammu & Kashmir, Delhi, Himachal Pradesh, Manipur and other north-eastern states have industrial or IT policies that have not been revised in the last three years. Tamil Nadu also has not come up with an industrial or ESDM policy, though it has come up with an IT policy note for 2012-13.

Let’s now study the state policies and find out how attractive they are to investors.

The policies mentioned here are just excerpts of the original policies. Please refer to the original policies for the terms and conditions for availing the benefits and other details.

We would also like to mention here that a company investing in electronics manufacturing in any of the states could avail all the incentives offered by individual states over and above the benefits offered by the Central government through its various initiatives to promote electronics manufacturing in the country.

Rajoo Goel, secretary general, ELCINA“The best support that states can offer is low cost unencumbered land, retention of state output taxes, low input tax and 4-5 per cent interest subsidy on capital investment and working capital loans.” 

Rajoo Goel, secretary general, ELCINA

“The state policies are attempting to lower disability costs of finance and energy through VAT/CST reimbursements, electricity subsidy, stamp duty reduction and capital subsidy. While these are welcomed, the electronics industry seeks an integrated ecosystem to be globally competitive.”

Vinod Sharma, chairman, ESC & CII

“Karnataka and AP seem to be on the right track of creating a conducive environment for an electronics hub. States can support the industry by creating an ecosystem, which promotes electronic hardware manufacturing.”

Vijay Gujarathi, director & VP, operations, EOS Power

“The subsidies offered by the states can ease the entry barriers for new projects. Industries need to be closer to markets for success of business. Hence, states in the north and south are lucrative destinations. But in the long run, all the destinations will have some attractions based on the growth of sectors like automotive, consumer, lighting, etc.”

N Chandramohan, country head, Juki India Pvt Ltd

“After AP and Karnataka, MP will be the next destination for investors. The state has a strong team to drive the initiatives. The state environment is also conducive for electronics manufacturing.”

Varun Manwani, director, Sahasra Electronics Pvt Ltd

State Policies

ANDHRA PRADESH: Electronics Hardware Policy 2012-2017

HIGHLIGHTS

  • 100% reimbursement of VAT for 5 years
  • Exemption from any power cuts and statutory inspections
  • 100% reimbursement of stamp duty, transfer duty and registration fee paid on sale/lease deeds
  • 20% investment subsidy limited to Rs 2 million for micro and small industries and an additional 5% incentive subsidy for women, SC and ST entrepreneurs
  • Power subsidy ranging from 10% to 50%, limited to a value of Rs 3 million for a period of 5 years
  • 10% subsidy on new capital equipment for technology upgradation
  • 25% rebate in land cost
  • Special incentives for MSMEs

AP ranks No. 5 in the national electronics industry and contributes 7.5 per cent of the electronics hardware manufactured in the country. Its manufacturing turnover reached Rs 65 billion in 2009-2010, with Rs 6.5 billion worth of hardware being exported. It houses about 300 electronics industries (in highly specialised lines) with an employee base of 60,000. Hence, it is all the more necessary for the state to have its own policy for the electronics industry.

Infrastructure and fiscal incentives

AP unveiled the state’s electronics hardware policy in June 2012, which offers a slew of incentives, including 100 per cent reimbursement of value added tax (VAT) for a period of five years to those who set up units in the state. Apart from creating a single window for clearances, the government offers incentives for establishing electronics manufacturing industries in Tier II and Tier III towns.

The state government has also exempted the electronics hardware industry from any power cuts and statutory inspections, except in the case of a specific complaint. The policy also proposes to create four clusters in and around Hyderabad.

Incentives such as 100 per cent reimbursement of stamp duty, transfer duty and registration fee paid on sale/lease deeds, etc, 50 per cent reimbursement on second transactions, power subsidy ranging from 10 per cent to 50 per cent—limited to Rs 3 million for a period of five years, among other discounts, are also offered. Besides, a 25 per cent rebate on land costs, limited to Rs 1 million in industrial estates, industrial parks, special economic (SEZs), parks, etc, is also being offered. A subsidy of about 10 per cent on new capital equipment for technology upgradation, limited to Rs 2.5 million, is also given to eligible companies.

Besides, there are several incentives for micro, small and medium enterprises (MSMEs) such as allocation/reservation of 20 per cent of order value to electronics hardware SMEs in state government promoted projects, recruitment assistance of Rs 2,50,000 to a micro company and of Rs 1 million to a small and medium company, etc. Likewise, a 10 per cent subsidy is given to an MSME on new capital equipment for technology upgradation.

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KARNATAKA: Electronics Hardware Policy 2011 and ESDM Policy 2013


HIGHLIGHTS

  • Rs 250 million allocated to fund projects
  • 95% reimbursement of CST
  • 50% reimbursement of the actual costs of filing patents
  • 20% reimbursement of actual R&D expenses
  • 100% exemption of stamp duty
  • Interest-free loans against eligible gross VAT
  • Special incentives for MSMEs

Karnataka has 85 chip design houses, 336 R&D facilities with over 6,00,000 technology professionals employed in Bengaluru alone. It is home to a third of the software companies, contributing more than 35 per cent of the nation’s software exports.

The Karnataka Electronics Hardware Policy was unveiled in June 2011, with an amount of Rs 250 million allocated to fund projects related to boosting electronics manufacturing in the state.

Infrastructure and fiscal incentives

The policy has identified three corridors to set up electronics hardware manufacturing hubs—Bangalore-Tumkur corridor concentrates on semiconductors, Hubli-Dharwad corridor focuses on automotive electronics, and Mysore-Nanjangud caters to medical electronics.

With investments of US$ 1,271.45 million, 47 special SEZs have been approved in Karnataka. The policy will also support the development of seven ESDM manufacturing clusters by 2020.

The policy targets to file 3000 domestic and 2000 international patents by ESDM companies by 2020. The state government offers a reimbursement of up to 50 per cent of the actual costs (including filing fees, attorney fees, search fees, maintenance fees) with a maximum of Rs 100,000 for filing a domestic patent and up to Rs 500,000 for filing an international patent.

Karnataka government will reimburse 50 per cent of the actual costs incurred in international marketing, sales promotion, trade show participation, etc. This reimbursement will be subject to a maximum of Rs 1 million per year, per company.

ESDM units are also eligible for an incentive in the form of interest-free loans against the eligible gross VAT under the Industrial Policy 2009. The state will reimburse 95 per cent of central sales tax(CST), till GST is implemented, during the first five years of operations.

The policy also offers R&D grants in the form of reimbursement equalling up to 20 per cent of the actual R&D expenses incurred annually, subject to a maximum of 2 per cent of the annual turnover. The R&D grant shall be subject to a maximum of Rs 10 million per company, per year. The government will provide a capital subsidy of up to 10 per cent or Rs 50 million, whichever is lower.

In addition to the above, fiscal incentives and concessions as per the Karnataka Industrial Policy 2009-14 will be extended to ESDM units, such as an investment promotion subsidy of a maximum of Rs 3 million. A 100 per cent exemption from stamp duty is also offered. Special incentives are also offered to MSMEs, such as 100 per cent exemption of electricity duty/tax for a maximum of five years.

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MADHYA PRADESH: IT Investment Policy 2012 and Industrial Promotion Policy 2010 (as amended in 2012)

HIGHLIGHTS

  • Provision of a customised package of fiscal incentives for projects with an investment of more than Rs 250 million
  • VAT refund for up to 10 years—limited to 100% of capital investment
  • Entry tax exemption up to 9 years
  • Subsidy of 15% on fixed capital investments for micro and small scale industry, and 5% land subsidy for mega projects
  • Interest subsidy of 5% for a period of 7 years with a limit of Rs 2 million for micro and small scale industries
  • 75% rebate on cost of land
  • Exemption from stamp duty, registration fees and entry tax

Madhya Pradesh (MP) has a lot to offer to those who choose to invest in the state as its primary, secondary and tertiary sectors registered high growth rates of 8.75 per cent, 11.11 per cent and 10.08 per cent, respectively, at current prices between 2007-12. The state showed an impressive CAGR of 12.7 per cent during 2005-10. About 43 industrial growth centres and 186 industrial areas in the state also boast excellent support infrastructure to assist industry growth. The state has several investment opportunities, as it has an emerging engineering and automobile sector. There are more than 800 manufacturing units in Bhopal and more than 100 auto component manufacturers in the state.

Looking at the potential of the state, MP had announced an investment policy in September 2012 that aims to develop electronics hardware manufacturing (EHM) and the IT/information technology enabled services (ITES) sectors in the state. EHM in the state qualifies for all benefits that are currently available to the IT industry. Relevant incentives are also provided under the Madhya Pradesh Industrial Promotion Policy 2010 (amended in 2012).

Infrastructure and fiscal incentives

The Union government has already notified four brownfield clusters in Dewas, Indore, Dhar and Bhopal districts, and four greenfield clusters in Bhopal, Gwalior, Indore and Jabalpur. MP boasts of software technology parks in Bhopal, Crystal IT park in Indore, an IT park in Gwalior and a massive infrastructure build-up across the investment corridors of Bhopal-Indore and Bhopal-Bina.

The state government will reimburse 75 per cent of the cost incurred by an IT/EHM company operating in the state on securing quality certifications, subject to a maximum ceiling of Rs 6,00,000. Exemptions in the existing floor area ratio (FAR) are considered on a case to case basis.

Stamp duty payable by IT/electronics companies on mortgage/hypothecation with banks/ financial institutions in designated investment areas will be exempted. Companies investing in the state will not require prior permission for installation of captive power plants. Uninterrupted power supply is being supplied to units in the industrial areas. These companies will be provided power through a dedicated feeder on payment of the requisite charges.

Land will be available at 25 per cent of the prevalent collector guideline rate, subject to availability, with the condition that the investment in fixed capital will be made within a period of three years.

The relevant provisions of the Industrial Promotion Policy would also be applicable with respect to interest subsidy, and the subsidy on capital investment.

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PUNJAB: Industrial Promotion Policy, 2013


HIGHLIGHTS

  • FCI, ranging from Rs 10 to 100 million, will be eligible for 50% of VAT plus 75% of CST retention for 7 years
  • A new category of unit would enjoy 80% of VAT incentive plus 75% of CST retention with maximum limit of 80% of FCI for 13 years
  • 100% exemption in electricity duty
  • 100% exemption in stamp duty
  • 100% exemption in property tax
  • SMEs with a capital investment of Rs 10-100 million will get an incentive of 50% of the total fixed capital investment

Foreseeing the growth of the electronics industry in India, Punjab government took the initiative in developing a conducive environment to attract investments. It has set up the Punjab State Electronics Development and Production Corporation to promote the electronics industry in the state. In June 2013, the state rolled out its Industrial Promotion Policy 2013 to attract investments in the ESDM sector.

Infrastructure and fiscal incentives

An electronics town has been set up at Mohali near Chandigarh. This township is spread over 200 acres, with a number of big, medium and small electronics units. Further, an area of 600 acres is under development for future projects. The state government has offered the Centre 40 acres of land in Mohali for the implementation of electronics manufacturing clusters.

Terming it as an ‘Earn Your Incentive’ policy, Punjab government focuses on three points—incentives, simplifying procedures and facilitation. The state has been divided into two zones—Zone I is less industrialised while Zone II is highly industrialised. Under the incentives for Zone I, manufacturing units having fixed capital investment (FCI) ranging from Rs 10 million to Rs 100 million, will be eligible for 50 per cent of VAT plus 75 per cent of CST retention for seven years. For units that have an FCI ranging from Rs 100 million to Rs 250 million, this period will be of eight years.

For units with FCI ranging from Rs 1 billion to Rs 5 billion, VAT incentives would be 70 per cent plus 75 per cent of CST retention, with maximum of 70 per cent of FCI for 11 years. In addition, these units would have 100 per cent exemption in electricity duty, stamp duty and property tax.

For industries in Zone II, units with an FCI of Rs 1 million to Rs 250 million would enjoy 25 per cent VAT plus 50 per cent of CST retention for 8 years; units with an FCI of Rs 250 million to Rs 1 billion would have 30 per cent of VAT and 50 per cent of FCI for 10 years; units with an FCI of Rs 1 billion to Rs 5 billion would have 35 per cent of VAT and 50 per cent of CST retention for 11 years, and units with an FCI above Rs 5 billion would enjoy 40 per cent of VAT and 50 per cent of CST retention for 13 years besides 50 per cent exemption in electricity duty, stamp duty and property tax. The state also emphasises on the development of SMEs, with a capital investment of Rs 10 to Rs 100 million. Under this category, the maximum cumulative incentives payable amount to 50 per cent of the total fixed capital investments.

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MAHARASHTRA: Industrial Policy 2013-18

HIGHLIGHTS

  • Industrial promotion subsidy calculated at the rate of 60-100% of VAT on local sales + CST+ 20-100%
  • 75% reimbursement of the cost of the water and energy audit
  • 100% stamp duty exemption
  • 100% electricity duty exemption in selected areas
  • Incentives for improving quality competitiveness, research and development, technology upgradation and cleaner production measures

Maharashtra has been a preferred investment destination for both domestic and foreign companies because of the availability of skilled manpower, enabling infrastructure and socio-economic development. The Industrial Policy 2013, which is not electronics-centric, was announced in January 2013. It has a three-tier incentive structure—an industrial promotion subsidy linked to all taxes paid, an interest subsidy on interest paid on term loans, and incentives for quality enhancement, quality competitiveness, credit rating and technology upgradation. The policy focuses on the holistic development of MSMEs, and aims to achieve a manufacturing sector growth rate of 12-13 per cent per annum.

Fiscal incentives

The Industrial Policy talks about an industrial promotion subsidy, which will be calculated at the rate of 60 to 100 per cent of VAT on local sales plus CST payable on eligible finished products plus 20 to 100 per cent of investment tax credit (ITC) on eligible finished products.

About 75 per cent reimbursement of the cost of the water and energy audit, limited to Rs 1,00,000 for the water audit and Rs 2,00,000 for the energy audit, is being offered. The policy also offers 100 per cent stamp duty exemption, and 100 per cent electricity duty exemption in selected areas. An interest subsidy at the rate of 5 per cent per year, up to the value of electricity consumed and bills paid for that year, will be admissible. Incentives for improving quality competitiveness, R&D, technology upgradation and cleaner production measures also continue as per the previous policy.

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HARYANA: Industrial and Investment Policy-2011

HIGHLIGHTS

Interest-free loans • Electricity duty exemption

Reduction in land use charges • Reduced VAT

The IT and ITES sector accounted for exports of Rs 230 billion out of the total exports of Rs 430 billion from the state during 2009-10.

Haryana has its manufacturing strengths in sectors like automobile and auto components, IT and ITES, and electronics goods. Although the state has not come up with an ESDM centric policy, its Industrial Investment Policy of 2011 strives to maintain a conducive environment to attract investments through investor-friendly rules and procedures.

Infrastructure and fiscal incentives

The Gurgaon-Manesar-Bawal region has been identified as an auto hub by the Union government. The Haryana government will continue to facilitate private sector investment to develop SEZs, IT parks, cyber parks and cyber cities exclusively for the electronics and information and communications industries. An electronics hardware technology park is coming up at Kundli while IT parks are coming up at Panchkula, Rai and IMT Manesar.

The state has received a total of 70 proposals for IT/ITES-specific SEZs, of which 35 have been approved. In addition, the IT department has recommended 80 cases for the development of cyber parks, of which the town and country planning department has granted licences for 33 proposals involving 262.50 acres of land.

The industrial policy unveiled various sops such as interest-free loans, electricity duty exemption, reduction in land use charges and VAT. The policy also focuses on the development of industrial estates in backward areas with the involvement of the private sector under the PPP model. Besides, the state has also offered special incentives for SEZ projects by relaxing external development charges.

Projects involving a minimum fixed capital investment of Rs 1 billion and above, or those that generate direct employment for more than 500 people, will get interest-free loans for a period of five to seven years, up to 50 per cent of the tax paid on the sale of goods produced by such industrial units under the Haryana VAT Act. These projects will also be exempted from the payment of electricity duty for a period of five years.

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WEST BENGAL: Policy on ICT 2012, and ICT Incentive Scheme 2012

HIGHLIGHTS

  • Rs 100 million venture capital fund
  • Fixed state capital investment subsidy of 10-15%
  • Waiver of electricity duty for a period of 5-7 years
  • Refund of 100% stamp duty and registration fee
  • Capital investment subsidy of 10-15% of fresh investments in plant and machinery, etc

West Bengal has immense potential to emerge as one of the most attractive investment destinations for the IT/ITES sector. However, it has been a late starter in this sector and presently contributes only about 2.6 per cent of India’s software turnover, providing employment to an estimated 1,00,000 people. Hence, the ICT Policy 2012 has been developed to promote electronics manufacturing, which focuses on promoting the hardware sector and ESDM in Tier II and III cities.

Infrastructure and fiscal incentives

The state aims to build at least 15 clusters in the hardware sector over the next five years. While the state will build clusters in select cities like Kolkata, Falta, Asansol, Kharagpur, Purulia, Kalyani and Siliguri for the SME sector, for large units the state offers infrastructural support at a reasonable cost.

The state government offers a Rs 100 million venture capital fund for the IT/ITES/ESDM sector. The policy offers capital investment subsidy, interest subsidy, employment generation subsidy, subsidy for quality improvement and patents in the MSME sector, and CST refund scheme.

The ICT Incentive Scheme 2012-17 encourages fixed capital investments for land, buildings, plant and machinery. The policy also offers a state capital investment subsidy of 10-15 per cent of the fixed capital investment, subject to certain limits.

Waiver of electricity duty for a period of five to seven years is offered. An eligible IT/ITES unit is also entitled to a refund of 100 per cent of the stamp duty and registration fee required for registering documents. There is also a capital investment subsidy of 10-15 per cent of fresh investments in plant and machinery, etc.

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UTTAR PRADESH: IT Policy 2012-17

HIGHLIGHTS

  • Interest subsidy of 5% on term loans and working capital
  • 100% stamp duty will be exempted
  • Land at a rebate of 25% on the prevailing sector rates
  • 100% additional FSI
  • 100% stamp duty exemption
  • Projects with proposed investments above Rs 5 billion will be considered for special incentives

Uttar Pradesh (UP) government approved the IT Policy 2012 to boost the IT/ITES industry in the state. The state is currently focusing on developing the necessary infrastructure and human capital, while initiating proactive engagements with investors and aiming for effective policy implementation.

Infrastructure and fiscal incentives

An IT city in Lucknow is expected to see the light of the day soon. The state government will transfer 150 acres of Gajaria farm land on the Lucknow-Sultanpur road for an IT city. Another IT city will be developed in Agra.

An interest subsidy of 5 per cent on term loans and working capital will be provided to small, medium and large companies for five years. Up to 100 per cent stamp duty will be exempted. The IT/ITES units with a capital investment of Rs 50 million or more will be allowed interest-free loans equivalent to the amount of VAT and CST deposited every year for a period of 10 years.

Investors in mega IT/ITES projects planning to establish industrial units in Tier II and III cities will be provided land at a rebate of 25 per cent on the prevailing sector rates. Land rebate and additional FSI incentives will be applicable to both infrastructure companies and IT/ITES units, which will also enjoy 100 per cent exemption from stamp duty. An industrial promotion subsidy equivalent to 50 per cent of the incentives admissible for new units will be available to the existing units. Projects that are estimated to be above Rs 5 billion will be considered for special incentives over and above the incentives mentioned above.

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KERALA: IT Policy 2012

HIGHLIGHTS

  • 30-40% standard investment subsidy on fixed capital investment, subject to a limit of Rs 1.5-2.5 million for companies
  • Power tariff under HT1 or LT-IV tariff
  • 100% exemption from stamp duty
  • Concession in building tax at the rate of 25-50% for LEED/GRIHA or IT buildings with an equivalent rating inside government-owned IT parks

Kerala’s IT Policy aims to develop and market the state as the most preferred IT/ITES investment and business destination in India, in order to ensure 5,00,000 direct jobs in the ICT sector and create at least 3,000 technology start-ups in the state by 2020. This policy does not specifically talk about any incentives for the ESDM sector.

Infrastructure and fiscal incentives

Technopark in Thiruvananthapuram, Infopark in Kochi, and Cyberpark in Kozhikode are the three IT parks promoted by the state government. All these parks have world-class facilities and excellent growth prospects. However, the policy emphasises that the promotion of private IT parks will not be at the expense of government-owned parks.

The policy earmarks a slew of benefits to private parks. All certified private IT parks will be brought under the Industrial Township and Single Window Clearance Board Act, and they will be eligible to maximum FAR/FSI, as applicable to the government-owned IT parks.

About 30-40 per cent standard investment subsidy on fixed capital investment, subject to a limit of Rs 1.5-2.5 million for companies, is offered. IT/ITES units are entitled to a power tariff based on HT1 or LT-IV rates. Units will enjoy 100 per cent exemption from stamp duty. The government also offers a concession in building tax at the rate of 25-50 per cent for LEED/GRIHA or IT buildings, with an equivalent rating inside government-owned IT parks and certified private IT parks.

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BIHAR: ICT Policy 2011 and Industrial Incentive Policy 2011

HIGHLIGHTS

  • 100% exemption in stamp duty and registration fee
  • Special package of incentives for innovative and indigenous IT projects
  • A 25-50% incentive/grant on the value of land allotted by government
  • Up to 60% incentive on plant and machinery for captive power generation
  • 80% reimbursement of VAT
  • 1% CST will be payable on the items produced
  • 100% exemption on electricity duty, conversion fees and luxury tax


Bihar aims to be the next destination favourite for those investing in the IT/ITES/EHM industries and through this, it aims to fuel the development of the state—fulfilling the ICT vision of the state by 2016. The state will create a venture fund with a corpus of about Rs 1 billion to promote entrepreneurs to set up their innovative IT/ITES/EHM units in Bihar. These units will be eligible for all the incentives provided under the Industrial Incentive Policy 2011 as well.

Fiscal incentives

IT/ITES/EHM units will enjoy 100 per cent exemption in the stamp duty and registration fees involved for the lease, sale and transfer of land. The maximum limit of various reimbursements like incentives for project report preparation, incentives on land/sheds, financial assistance on technical knowhow, capital subsidies, etc, is to be given to a unit after commencement of commercial production. A special package of incentives will be offered for innovative and indigenous IT projects and IT/ITES/EHM units.

All IT/ITES/EHM units will be entitled to a 25-50 per cent incentive/grant on the value of land allotted by government agencies. Up to a 60 per cent incentive on plant and machinery for captive power generation has also been offered. New IT/ITES/EHM units will get a reimbursement of 20 per cent on the capital investment made on hardware, IT equipment, software, etc.

During the post-production stage of a new IT/ITES/EHM unit, in case of the output tax being adjusted with the entry tax, the amount paid under the head of ‘Entry tax’ will be included within the 80 per cent reimbursement of the VAT amount. Only 1 per cent CST will be payable on the items manufactured by the registered MSME of IT/ITES/EHM units. New units will also be entitled for reimbursement of 80 per cent against the admissible VAT amount deposited with the state government, for a period of 10 years. The maximum reimbursement will be 300 per cent of capital investment.

Units will also enjoy 100 per cent exemption on electricity duty, conversion fees and luxury tax.

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GOA: IT Policy 2012-17 and Industrial Policy

HIGHLIGHTS

  • 25% subsidy on fixed capital investments, limited to Rs 2.5 million
  • 50-100% reimbursement of stamp duty
  • 25% subsidy on power and water consumption for a period of two years
  • 10% reimbursement on capital investment on equipment, etc
  • Subsidy up to 50% on the cost of power generating sets
  • Sales tax is exempted for 15 years for small scale units and 12 years for large and medium units


Though Goa aims to become an electronics hardware manufacturing hub that will meet domestic as well as global requirements, its IT policy is not ESDM centric. Goa is now focusing on IT/ITES industries as thrust areas, and the incentives available under the Industrial Policy are also applicable to these units. The hardware industry is also classified as part of IT/ITES and will receive equal attention from the government.

Infrastructure and fiscal incentives

About 20 industrial estates have been developed in the state, which encompass about 50 sub-sectors, including automobile accessories, etc.

The incentives will apply to eligible IT/ITES units, inclusive of hardware units set up anywhere in Goa. Reimbursement of the entire stamp duty, rebate in power tariff and applicability of industrial category tariff, as well as a subsidy on power are offered. Subsidy of 25 per cent on power and water consumption for a period of two years will also be available.

Goa-based IT/ITES units will be given 15 per cent price preference in government purchases. One-third of the government’s spending on IT/ITES, including hardware purchases and AMCs, will be earmarked for Goa-based companies registered with the department of IT.

IT/ITES units will get a reimbursement of 10 per cent on the capital investment made on hardware, software, network equipment, etc.

One of the most attractive incentives offered under the State Industrial Policy is the 25 per cent subsidy on fixed capital investment limited to Rs 2.5 million. The sales tax exemption facility is available for a period of 15 years for small scale units and 12 years for large and medium scale units. The policy exempts 50 per cent of the stamp duty. A subsidy up to 50 per cent of the cost of power generating sets (limited to a maximum of Rs 1,00,000) purchased by small scale units is offered by the state government.

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JHARKHAND: Industrial Policy 2012-16

HIGHLIGHTS

  • 50% subsidy on investments made in plant and machinery
  • 50% reimbursement of stamp duty and registration fee for land
  • MSMEs are eligible for refund of 60-100% of VAT on capital investments
  • Large and mega industries are eligible for reimbursement of 50% of the net VAT paid per annum up to a maximum of 75% of the total fixed capital investments for different durations, depending on the location of the unit
  • 40% of the capital expenditure incurred in captive power generating sets
  • Exemption from electricity duty for 5 years


The Jharkhand government brought out the new Industrial Policy in June 2012, the first one since its previous industrial policy in 2001. The policy, with a renewed focus on electronics and IT industry this time, acknowledges that hardly anything was achieved by the 2001 policy in these industry sectors as well as on the creation of SEZs. The policy has a special thrust in four sectors, including information technology and auto components manufacturing. Through this policy, the government has decided to give more impetus to the MSME sector and keep around 40 per cent of the land resources reserved for it.

Infrastructure and fiscal incentives

The first product-specific automobile and auto component SEZ at Adityapur has been approved. It is under implementation at a total cost of Rs 650 million. The policy will also promote IT/automobile sector-specific SEZs.

Industrial units will be entitled to get a comprehensive project investment subsidy (CPIS) for investments in plant and machinery, adding up to about 50 per cent. Manufacturing units with direct employment of 100 people will enjoy 50 per cent reimbursement of the stamp duty and registration fee for land. This facility will be granted only for the first transaction involving a particular plot of land.

MSMEs are eligible for reimbursement of 60 per cent of the net VAT paid per annum, up to a maximum of 100 per cent of the total fixed capital investments made, for different durations, depending on the location. Large and mega industries are eligible for reimbursement of 50 per cent of the net VAT paid per annum up to a maximum of 75 per cent of the total fixed capital investments, for different durations, depending on the location of the unit.

Mega IT units will be exempted from electricity duty for five years. The government will encourage captive power generation in IT-ITES locations. About 40 per cent of the capital expenditure incurred in soundless captive power generating sets will be reimbursed. This will be a one-time incentive under CPIS.

The policy offers exemption from electricity duty for 5 years for mega IT units. Recruitment incentive of Rs 0.25 million for every 50 local people employed in IT/ITES firms with a cap of a maximum of Rs 2.5 million, is also available. Units can enjoy 100 per cent reimbursement on stamp duty, transfer duty, and the registration fee for the first transactions involving land purchase or the leasing of space, and 50 per cent for second transactions.

In addition, projects worth Rs 50 million, and with a minimum of 100 job opportunities, would get an extra 5 per cent grant under the provision of CPIS.

As land is a sensitive issue for the state, especially in the Maoist-infested areas, the government is walking a tightrope. It will identify and use waste land owned by the government and public sector entities, and redirect excess land owned by some industries to new investors. But there will be no concession in the policy for converting agricultural land to the industrial category. The state has also given some regulatory relief—like exemption from the Factory Act, etc.

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Odisha: Proposed ICT Policy

HIGHLIGHTS

  • Entry tax waiver on machines, equipment for three years
  • Exemption of sales tax and value added tax (VAT) to be extended to capital purchases for IT parks
  • 60% built up area will be used for IT/ITES/ESDM purposes
  • 10% of the total built up area as furnished space for allocation to incubation units


The proposed ICT Policy of Odisha, that is in the final stage of getting formulated, doles out subsidy sops and incentives for IT/ESDM units. By 2020, the draft policy of the state aims to achieve a gross ICT turnover (including exports of software and IT services, ESDM, domestic consumption and training) of US$ 4 billion and attract at least 10 leading IT/ITES companies and five leading ESDM companies to the state.

Infrastructure & fiscal incentives

The new policy aims to create an infrastructure of 6 million sq ft and develop 2000 acres of land bank. The state will encourage establishment of private IT parks. The policy mandates that 60 per cent of the built up area will be used for IT/ITES/ ESDM purposes. Similarly, the certified private IT parks, under the policy, have to earmark at least 10 per cent of the total built up area as furnished space for allocation to incubation units. The rent control will be decided by the state government if a park is set up with the government concessions or subsidies on land.

The policy has set target to achieve direct employment of 60,000 professionals in 800 IT/ITES and ESDM units by 2020. To encourage the investors to set up IT parks in Odisha, the proposed ICT policy in the state promises entry tax waiver on machines, equipment, capital goods and construction material procured for implementation of infrastructure projects. The exemption from payment of entry tax will be for a period of three years of procurement of material or the date of completion of the project whichever earlier. Exemption of sales tax and value added tax (VAT) is also likely to be extended to capital purchases for IT parks. The Odisha Computer Applications Centre (OCAC), the directorate of the IT department, would be the nodal agency for implementation of the ICT Policy.

The new MSMes will be exempted from payment of entry tax on acquisition of plant and machinery for setting up of industrial units. Such units will also be eligible for waiver of entry tax on purchase of raw materials for a period of five years subject to a ceiling of 100 per cent of fixed capital investment. 

A COMPARATIVE STUDY OF THE STATE POLICIES FOR IT/ITES/ELECTRONICS SECTORS

State Name of policy Electronic
centric
Subsidy on capital investment Tax
exemption
Stamp duty exemption Electricity subsidy Subsidy on equipment Rebate on land cost
Andhra
Pradesh
Electronic Hardware Policy 2012 Yes 20% investment subsidy, limited to Rs 2 million 100% on VAT 100% 10-50%, limited to Rs 3 million 10% on new captive equipment 25%
Bihar ICT Policy 2011 & Industrial Incentive Policy 2011 Yes 20% investment subsidy, limited to Rs 7.5 million 80% on VAT, 1% on CST 100% 100% Up to 60% on plant & machinery for captive power generation 25-50%
Goa IT Policy 2012 & Industrial Policy No 25% investment subsidy, limited to Rs 2.5 million   50% Rebate in power tariff; subsidy of 25% on power and water consumption 10% on captive investment on equipment, etc  
Haryana Industrial and Investment Policy 2011 No   Reduced VAT   Electricity duty exemption   Reduction in land use charges
Jharkhand Industrial Policy 2012 No 50% investment subsidy 60-100% on vat 50% 100%    
Karnataka Electronics Hardware Policy 2011 & ESDM Policy 2013 Yes 10% investment subsidy or Rs 50 million 95% on CST 100%   20% of R&D expenses  
Kerala vIT Policy 2012 No 30-40% standard investment subsidy, limited to Rs 1.5-2.5 million   100% Power tariff under HT1 or LT-IV rates   25-50% on building tax
Madhya
Pradesh
IT Investment Policy 2012 & Industrial Promotion Policy 2012 Yes Subsidy on fixed capital investments 100% on VAT, entry tax exemption Exemption from stamp duty Exemption for captive power plants Subsidy on machinery 75%
Maharashtra Industrial Policy 2013-18 No Subsidy on fixed capital investment Industrial promotion subsidy of 60-100% of VAT on local sales + CST + 20-100% of ITC 100% 100% in selected areas, 75% reimbursement on the cost of water and energy audits    
Punjab Industrial Promotion Policy 2013 No Subsidy on capital investment VAT, CST, property tax 100% 100%    
Uttar Pradesh IT Policy 2012 No Subsidy on capital investment   100%   Subsidy on plant and machinery  
West Bengal Policy on ICT 2012, and ICT Incentive Scheme 2012 Yes Subsidy on capital investment   100% 100% 10-15%  

 Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine

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