Financial Assistance for Electronic Component Manufacturers

PLI SCHEME – AN OVERVIEW

Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing offers a production linked incentive to boost domestic manufacturing and attract large investments in mobile phone manufacturing and specified electronic components, including Assembly, Testing, Marking and Packaging (ATMP) units. The Scheme would tremendously boost the electronics manufacturing landscape and establish India at the global level in electronics sector.

PLI SCHEME – AN OVERVIEW

Company Engaged in manufacturing of Incremental Investment from 2020-21 to 2023-24 Incremental sales from 2020-21 to 2024-25
Other than Domestic Mobile Phones Cumulatively  Rs.1,000Crs Cumulatively Rs.25,000Crs
Domestic Mobile Phones Cumulatively Rs.200Crs Cumulatively Rs.5,000Crs
Other than Domestic or Domestic Electronic  Component Cumulatively  Rs.100Crs Cumulatively Rs.600Crs

1. Incase of “other than domestic companies”, mobile phones having invoice value >Rs.15,000 shall be taken for incentive calculation. However, for eligibility of “incremental sales” all sales considered irrespective of invoice value.

Ex: A ltd. Sold mobile worth of Rs.5,000Crs in FY 2020-21. Out of that, sales of mobiles having invoice value >Rs.15,000 is Rs.4000Crs and remaining mobile phone invoice value less than or equal to Rs.15,000. Now for incentive calculation Rs.4,000Crs will be considered and for eligibility Rs.5,000Crs will be considered.

2. Domestic company means a company in which >50% is held by Indian citizens or Indian companies.

3. Electronic component manufacturing means companies engaged in SMT Components. Semi Conductors, Passive Components and assembly, testing and packing units, Sensors and System in Package.

4. This scheme applicable from August,2020 and eligible companies can make application with in 4 months from August,2020.

5. There is separate set of authorities for verification of incentive claims.

PLI Scheme – Flow of Sales and Investment

Goods Manufactured Mobile Phones  (Other than  Domestic Co.) Mobile Phones  (Domestic Co.) Electric  Component
Incremental Sales from FY 2019-20 (i.e. base Year) (Rs.in Crs) Y1: 4,000 Y1: 500 Y1: 100
Y2: 8,000 Y2: 1,000 Y2: 200
Y3: 15,000 Y3: 2,000 Y3: 300
Y4: 20,000 Y4: 3,500 Y4: 450
Y5: 25,000 Y5: 5,000 Y5: 600`
Incremental investment from FY 2019-20 (i.e. base Year) (Rs.in Crs) Y1: 250 Y1: 50 Y1: 25
Y2: 500 Y2: 100 Y2: 50
Y3: 750 Y3: 150 Y3: 75
Y4: 1,000 Y4: 200 Y4: 100

CAPITAL INCENTIVE SCHEME – AN OVERVIEW

Objective:

To provide incentive of 25% on capital expenditure to overcome difficulties in manufacture of electronic components and semiconductors in India.

Eligibility:

It is depend on type electronic goods manufactured and amount of investment. Investment ranges from Rs.5Crs to Rs.1,000Crs.

Minimum Investment and type of goods:

Eligible Capital Expenditure:

> Plant & Machinery

> Equipment

> Associated utilities

> Technology, including Research and Development expenditure.

Note: Refurbished capital expenditure will be considered provided it should be not exceeding 20% of total eligible capital expenditure.

Period of continuance of business by entity:

a. Minimum 3 years from the date of commencement of production or

b. 1 year from date of receipt of last incentive, whichever is later.

FAQ on above schemes

1.Can ABC Pvt. Ltd. become developer of electronic manufacturing cluster?

Ans: No, as per scheme, state Govt., SIA, Sate Public Sector Unit, Centre Public Sector Unit or Industrial Corridor Development Corporation can become developer of EMC. Thereby, ABC Pvt. Ltd. can not become developer of EMC.

 2. Are units in EMC eligible to get any financial assistance from government?

Ans: Yes, units in EMC can get benefits under PLI scheme or Capital incentive for manufacture of Electronic Components, if they satisfy conditions under those schemes.

3. What are the benefits to units in EMC?

Ans: Units in EMC can access to world class infrastructure, easy supply chain.

4. Has any state govt. notified EMC?

Ans: Karnataka govt. has notified EMC in Chikkaballapura, Mysuru, Kolar and Dharwad.

5. Can a company intends to manufacture garments set up plant in EMC?

Ans: No, only company intends to manufacture of electronics can set up plant in EMC.

6. Can ABC Pvt. Ltd. Intends to manufacture garment is eligible to PLI scheme?

Ans: No, only companies which are intends to manufacture of mobiles and electronic components are eligible to incentive under PLI scheme.

7. ABC mobile manufacturing company are presently getting benefits under M-SIPS and Capital incentive scheme. Can this company get benefit under PLI scheme.

Ans: Yes, eligibility under this scheme does not take away eligibility under any other scheme.

8. Eligible companies under PLI scheme, should make investment and sales at a time?

Ans: No, eligible companies should make required investment and achieve sales in 4 years and 5 years respectively by meeting the year wise investment and sales limit specified in notification.

9. A mobile manufacturing company made sales of Rs.5,000crs in FY 2020-21. Out of that, Rs.3,000Crs made up to July, 2020 and remaining made from august, 2020. What are the eligible sales under PLI scheme?

Ans: Incentives under this schemes applicable from 1st August, 2020. So, Rs.2,000crs only eligible for incentive calculation.

10. ABC electronic manufacturing company are presently getting benefits under M-SIPS and PLI scheme. Can this company get benefit under capital incentive scheme?

Ans: Entity got benefitted under M-SIPS is not eligible to get benefits under this scheme. However, it can get incentive under PLI scheme. So, ABC not eligible under capital incentive scheme but eligible under PLI scheme.

11. XYZ Ltd. wants to avail incentive under capital incentive scheme. What is the time limit?

Ans: XYZ Ltd. can make application up to 31st March, 2023.

12. What is the incentive and basis for calculation under capital incentive scheme?

Ans: Incentive is 25% on the basis of investment raging from Rs.5Crs to Rs.1,000Crs.

13. An eligible entity has incurred research expenditure of Rs.50Crs and development expenditure of Rs.65Crs. As per AS-26, research expenditure should be charged to P&L. In the above situation can the entity claim incentive on Rs.115crs or only Rs.65crs under capital incentive scheme?

Ans: As per the scheme, entity can claim incentive on research and development expenditure irrespective of capitalization in the books of account. So, entity can claim incentive on Rs.115Crs

14. An eligible entity has incurred total capex of Rs.200Crs. Out of that, New foreign and domestic capex is Rs.100crs and Rs.50Crs respectively and old capex is Rs.50Crs. What is eligible investment for incentive?

Ans: As per the capital incentive scheme, only NEW capital expenditure is eligible for incentive. However, if old capex is less than 20% of new capex, then old capex can be considered. Here, eligible capex is Rs.180Crs (150+150*20%) and old capex of Rs.20Crs is not eligible for incentive.

15. An entity started electronic manufacturing in 1st April, 2021. Due to operational inconsistency want to stop operations from 1st April, 2023 and company received last incentive in 26th December, 2022. Is the entity eligible to stop operations from 1st April, 2023?

Ans: As per the capital incentive scheme, company has to keep business operational as follows:

a. Minimum 3 years from the date of commencement of production or

b. 1 year from date of receipt of last incentive, whichever is later.

Hence, company has to keep business operational up to 31st march, 2024.

Author Bio

Qualification: CA in Job / Business
Company: N/A
Location: bangalore, Karnataka, India
Member Since: 13 Apr 2020 | Total Posts: 1
I, CA Vishnu Vardhan, qualified CA in Nov, 2019. View Full Profile

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