A. Background
The COVID hit us hard, the economy has plummeted for a while and the unemployment also soared high. But, as the second wave is also over and now the economy is poised for a tremendous bounce-back.
The world is also looking towards India as an alternative to China for the new projects. To tap their interest the Governments and the policymakers must do something extra.
And fortunately, the Haryana government has come forward with a policy that surely will help to bring some capital investment and improve the business climate in the state of Haryana. The latest policy to grant “Investment Subsidy in lieu of Net SGST” will not only catch the interest of foreign enterprises but will also ensure domestic participation.
This is an all-inclusive scheme with coverage of a broad spectrum of businesses. This will surely help Haryana strengthen its footprint on the industrial map of India and also foster development in the state.
B. About the Scheme
As the name suggests the scheme provides for a financial incentive which will be given to the enterprises as a percentage of their net SGST Cash liability (i.e. SGST liability to be paid through electronic cash ledger) up to a certain period, subject to a limit applicable for the class of the enterprise in terms of their New Fixed Capital Investment (FCI).
So, in layman terms, the Government will incentivize the enterprises for making new investments in the state of Haryana and Government will provide a percentage of their SGST share as Cashback to the eligible enterprises for a certain period ranging between 5-10 years.
But, here is a catch, the government wants the enterprises to invest in the backward areas and they have categorized those blocks as A, B, C and D, where D is the most backward. The Investment amount is the least and rewards are most for the backward blocks.
The scheme will cover the amount of investment in land/or irrevocable lease of a minimum of 10 years, construction of the building and new plant and machinery (including Gen Set, tools and equipment) under the value of new FCI. To calculate benefits the scheme shall be reckoned from 1st January 2021.
C. Quantum of Incentive
| Category of Enterprise | Criteria | Incentive (As a % of Net SGST) | Max Incentive |
| Ultra- Megaprojects | FCI Amount (Block wise)-
A- 6000 Cr. B- 4,500 Cr. C- 3,000 Cr. D- 1,500 Cr. |
A customised package of Incentive by Haryana Enterprises Promotion Board (HEPB), Quantum and period of subsidy will be decided by HEPB | |
| Cluster Establishment / Relocation | 10 enterprises engaged in similar economic activity and meeting FCI requirement of Mega Projects | Special package of Incentives by HEPB basis the cost-benefit analysis | |
| Mega Projects | FCI Amount (Block wise) –
B- 200 Cr. C- 100 Cr. D- 75 Cr. |
First 5 years & Next 3 years
B- 30% & 15% C- 50% & 25% D- 75% & 35% |
B & C – 100% of FCI
D- 125% of FCI |
| Large Project | IPM > 50 Cr.
TO > 250 Cr. |
First 5 years & Next 3 years
B- 30% & 15% C- 50% & 25% First 7 years & next 3 years D- 75% & 35% |
B & C – 100% of FCI D- 125% of FCI |
| Medium Enterprises | IPM < 50 Cr.
TO < 250 Cr. |
First 10 years & Next 3 years
B- 50% & 35% First 7 years & next 3 years- C- 75% & 35% First 5 years & next 3 years- D- 75% & 35% |
B- 100% of FCI
C- 125% of FCI D- 150% of FCI |
| Small Enterprises | IPM < 10 Cr.
TO < 50 Cr. |
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| Micro Enterprises | IPM < 1 Cr.
TO < 250 Cr. |
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| Thrust Sectors (8 thrust sectors identified and HEPB may amend the list) | Auto & components & Light engineering, Agro-based & Food processing, Textiles & apparels, Defence & Aerospace Pharmaceuticals and Medical devices, Chemical & Petrochemicals, Large scale energy & data storage Electronic System Design & Manufacturing | B- 50% for 7 years
C- 75% for 8 years E- 100% for 10 years A- 100% up to 5 years B, C & D- 100% up to 10 years |
B- 100% of FCI
C- 125% of FCI D- 150% of FCI 100% of FCI |
| Start-Ups | Registered with Start-Up Haryana | 100% for 7 years | 100% of FCI |
| Service Enterprises | Health Care, Education, IT, Bulk Courier, R&D Centres, Testing Lab, Engineering & Design, Equipment leasing, Maintenance and Repair, Environmental services, Entertainment parks | B, C & D- 50% up to 5 years | 100% of FCI |
Note-
i) A, B, C and D are geographical blocks notified by the Government of Haryana for this scheme. The categorization of the blocks may be accessed in Notification no. 49/43/2015-4IB1 Dated 15th November 2018 issued by Industries and Commerce Department, Haryana Government
ii) IPM means the value of investment the in Plant & Machinery & TO means gross turnover of the enterprise.
iii) The criteria limits for Micro, Small and Medium and Large are as per MSMED Act, 2006 and will be subject to change as per the definition given under the said act
iv) In case of mega projects having inverted duties, the Investment Subsidy up to 5% of FCI will be given for a period of 8 years in equal annual instalments subject to an annual ceiling of INR 5 Cr. per mega project.
v) In case, where Net SGST deposited under cash ledger is less than 5% of the FCI in a year, the Investment Subsidy up to 5% of FCI will be given for a period of 8 years in equal annual instalments subject to an annual ceiling of INR 5 Cr. per mega project.
vi) In the case of micro enterprises led by Women/SC/ST, 75% of net SGST for first 5 years and 35% for next 3 years in all blocks.
vii) Various other categories such as import substitution, co-location, data centers and essential sector enterprises are covered in the scheme.
C. Eligibility Criteria
The enterprise or industrial unit shall have to comply with the following conditions to be eligible under the scheme-
i) Ultra, Mega & Large units shall file IEM (Industrial Entrepreneur Memorandum) and MSME enterprises shall be having Udhyam Registration and Haryana Udhyam Memorandum
ii) Units shall have GST Registration
iii) Unit shall not be in the restrictive list as notified by the Haryana Government
iv) Unit shall have obtained NOC/CLU from the competent authority, if applicable
v) The unit should be in commercial production and regular production at the time of disbursement
vi) Only eligiible products should be manufactured and no other business shall be conducted
vii) Wherever expansion or diversification has been done, then a separate GST registration shall be obtained and separate accounts shall be maintained
viii) Further, in case of expansion, the turnover of the existing unit shall not be lower than the average turnover of the last three years during the period of subsidy entitlement
ix) The eligible unit shall not deploy any intermediary/marketing network/or any other middle man, either directly or indirectly controlled by it to convert inter-state supplies into intra-state supplies, else the amount paid will be recovered with 18% interest per annum.
D. Procedure
The enterprise shall have to follow the below procedure for availing the incentive under the scheme-
i) Application in prescribed Annexure-1 to be submitted on the web portal of the department within 3 months of the close of a financial year
ii) The Application will be processed by the department and deficiencies if any will be communicated through the portal within 7 days
iii) The Applicant shall have to rectify the deficiencies in the next 7 days
iv) After completion of the case, the inspection of the unit will be done to assess the value of the new investment
v) If everything is found proper then a letter of sanction will be issued within 7 days and disbursement of the amount will be made in the next 7 days
vi) An appeal may be made to the Administrative Secretary, Industries & Commerce against any order within 30 days from the date of communication of the order
E. Drawbacks of the Scheme
Though the scheme seems to be very much lucrative at first instance, it also has some of the issues as below-
i) Benefit only for SGST liability, therefore in case consumption or demand of the production is not significant in the state then it may not be lucrative for the enterprise.
ii) Too much documentation is required in the scheme. Like DETC certificate for liability paid in cash may be avoided and cash challan or electronic cash register may be demanded.
iii) Inspection of the units by the officers might lead to collusion and corruption. Inspection should be carried out only in risk-prone cases and with the approval of the higher authority.
iv) Eligibility condition as mentioned in clause (ix) of para C above, i.e. to not deploy any marketing network might be a bit regressive and pose various restrictions on the business to ensure true compliance of the scheme.
F. Conclusion
As said by Greg Anderson, “The law of win-win says, let’s not do it your way or my way; let’s do it the best way.”
Therefore, the best way would have been a central scheme from the Indian Government with an option of on-boarding from the State Governments and the benefits should have been extended to overall cash liability instead of only SGST cash liability.
But as also said, “Something is better than nothing”, this scheme will also foster the investment climate at least in Haryana and there is an impetus to BUILD, INVIGORATE and FOSTER.
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Disclaimer- Although the above document has been prepared after due research and extensive care has been taken while preparation of this document. However, the author does not take any responsibility for any decision taken basis this document. It is advised to approach a professional consultant before arriving at any conclusion based on the above.
Authored by CA Brijendra Tripathi | Founder & Proprietor | Tripathi Brijendra & Associates | Email- brijendra.tripathi@tbaca.in
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