The big industrial houses or the MSME (Micro, Small and Medium Enterprises) no one is left untouched with the impact of COVID-19. Therefore it would not be wrong to say that the industry is trying to survive the impact with all available resources. But are we judiciously using the resources available with us? Asking the Government to release the stimulus so that MSME’s can survive, but are we aware of the already existing incentives provided by the State Government?

So lets us delve on the incentives already existing under policies issued by the Government of Punjab.

Time to Time State Governments issues policies in order to increase the investment opportunities in their respective states which in turn increases the employment, revenue of the Government and lead to overall development of the State. Corollary the Government of Punjab has issued various policies, the latest being the Industrial Business & Development Policy 2017 (for brevity ‘IBDP-2017’ or ‘The Policy’) followed by the Detailed Schemes & Operational Guidelines. Now certainly there would be some questions about the eligibility, incentives available, time limits, etc to avail the incentives. These are discussed herein under:

Q : Who are eligible for availing the incentives under IBDP 2017 ?

The units which have commenced the Production on or after 17th October 2017 are eligible for incentives under this Policy.

Q : Is there any requirement of Minimum Investment ?

All new units are eligible for applying under the policy. Even the existing units investing in expansion, diversification and modernisation are also eligible as per the below criteria:

Original Investment Minimum Investment
More than 100 Crore 50 Crores
Less than 100 Crore 50% of the Original Investment

Thus large units will become eligible for incentives even if the investment is just 50 crores.

Further, the policy allows phase wise investment (2 phases) wherein investment is upto 100 crores. Additional phases are allowed for investments above 100 crores.

Q : What all is included in the calculation of eligible investment?

Expenditure on procurement of land, building, plant, machinery and equipment is allowed to be considered for eligible investment. It may be noted that land taken on lease is not eligible for consideration in the investment amount (FCI). Similarly only imported second hand machinery can be considered for consideration of FCI. Special furniture & equipment needs of the tourism industry have also been specifically mentioned for inclusion in value of FCI.

GST availed as input on purchase of plant & machinery is generally excluded from the value of investment. Similarly expenditure made after the date of commencement of production is required to be excluded. There may be cases where the work / installation has been done before commencement of production but the invoice from the vendor is received after commencement of production. Such cases may be included in value of FCI provided the company is able to prove the actual installation or completion work before the production commencement date.

The FCI will need to be verified and certified by a Chartered Accountant and thereafter the same will be verified by independent agencies appointed by the Industries Department of Punjab.

Q : What are the eligible type of industries ?

Manufacturing Industries & Specified service sector industries like information technology & Information technology Enabled industries, Healthcare Industries, Tourism & Hospitality Industries, Media & Entertainment Industries are eligible for availing the incentives under the Policy. Further the following list of the industries is not eligible to avail benefits under the Policy:

1. Manufacturing/packing of alcoholic products including Distilleries, Breweries and Wineries

2. Manufacturing of Tobacco products including Cigars, Cigarettes and Gutka

3. Brick/ Tile Kilns

4. Vanaspati Ghee Mills

5. Rice Shellers

6. For Border districts and Kandi Area, only (i), (ii) and (iii) above shall be treated as negative list of industry. Further, for Border Zone within 30 Kms of international border, only (ii) above shall be treated as negative list of industry.

The government has also provided the list of various Thrust Sectors wherein the quantum and time limit to claim the incentives are more than the other units.

 Q : What are the various Incentive under the policy ?

The eligible units have been segregated into MSME, Large & Anchor units on the basis of the Investment size. However the key incentives available under the Policy are as follows. It may be noted that time and quantum of incentive will differ based on the categorisation of the unit. The overall cap on the amount of incentives will be limited to 100% / 200% of the FCI as the case may be.

  • 100% Exemption/Reimbursement of Stamp Duty
  • 100% Exemption of CLU
  • 100% Exemption from Electricity Duty for upto 15 years
  • Reimbursement of GST Paid for upto 15 years
  • 100% Exemption of Property tax for upto 10 years
  • Employment Generation Subsidy for anchor units upto 48,000/- per annum per employee for 5 years
  • Interest Subsidy
  • Freezing of Power Tariff @ Rs. 5 per unit

For most of the industries the major incentives is reimbursement of GST. The Government of Punjab has issued a separate notification for prescribing the formula for calculation of incentive, the same is mentioned herein under:

(Net SGST + Net CGST + Net IGST) on sales × Multiplier

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The multiplier is reckoned on the basis of GST rate,

GST Rate Multiplier
Upto 10% 100%
More than 10% and  upto 15% 75%
More than 15% and upto 20% 50%
More than 20% 25%

Further in the case of a unit with multiple outputs having more than one GST rate the incentive amount as above shall be calculated pro rata to the respective sales. Moreover there is a minimum benefit also prescribed subject to certain condition.

Q : Any sunset clause of the Policy

Every good thing comes with the time limit attached to it and so does this Policy comes with the sunset clause. As per the relevant clause of the policy the benefit under this policy can be availed within 5 years from the date of the notification i.e. till 16th October 2022.

Q : How to proceed for availing the incentives

Any investor who wants to avail the benefit must proceed with following steps:

1. Register on business first portal (https://pbindustries.gov.in/static/)

2. Filing CAF (Common Application Form)

3. Post the approval of CAF, filing iCAF (Incentive Common Application Form)

4. Thereafter the scrutiny committee/ district level committee would submit a report and the investor will then be eligible for filing the requisite incentive forms.

Q : Can an Industry which commenced production after 17th October 2017 but has not applied for incentives can apply now?

Since the sunset clause is in October 2022, the industries can still apply for benefits under the policies provided all other conditions as mentioned supra are fulfilled.

The need of the hour is to judicially utilise the available resources and explore the benefits provided by Government before making an Investment. In the end we would like to quote the words of Albert Einstein – “In the Middle of Difficulty Lies an opportunity”.

(The views expressed are Personal)

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