PREAMBLE- Scheme for Incentive to Industries – Gujarat Industrial Policy -2015
The Gujarat government has declared on 25th July, 2016 the Scheme for Incentive to Industries under Gujarat Industrial Policy 2015 (Government resolution no. INC-102015-645918-1) (hereinafter referred as ITI-2016) to ensure sustained industrial growth through various innovative initiatives so as to further improve the conducive industrial climate in the State and to provide global competitive edge to the industries in the State.
1. Operative period of ITI -2016
The ITI -2015 shall remain in operation from the 25th July, 2016 to 24th July, 2021.
2. Meaning of New Industrial Undertaking
A New Industrial Unit means a new industrial project set up by an industrial undertaking that has commenced the commercial production during the operative period of the scheme, provided it satisfies the following conditions:
a. The new project should have obtained a separate Letter of Intent or a Letter of Approval or has filed Industrial Entrepreneur Memorandum (IEMJ or Entrepreneur Memorandum (EM) / Udhyog Aadhar, as prescribed by the Government of India, with the competent authority.
b. The new project should have separately identifiable fixed capital investment. ‘Separately identifiable capital investment’ means the new plant and machinery should be housed in separate premises/ building and shall have to maintain separate books of accounts.
However, the new proiect will not lose its eligibility, if the utilities of an existing project, such as for water, electricity, steam, gas, pollution control facilities etc. are utilized.
3. Meaning of Micro, Small, Medium, Large, Mega and Ultra Mega Industrial undertaking:-
|Sr. no.||Type of enterprise||Capital investment|
|(i)||Micro, Small and Medium Industrial undertaking||Up to Rs. 10 crores|
|(ii)||Large Industrial undertaking||Above Rs. 10 crores but up to Rs. 1000 crore|
|(iii)||Mega Industrial undertaking||Above Rs. 1000 crores but up to Rs. 4000 crore|
|(iv)||Ultra Mega Industrial undertaking||Above Rs. 4000 crores|
4. Meaning of Gross Fixed Capital investment
a) Gross Fixed Capital Investment means the investment made in land, building, plant and machinery, utilities, tools and equipment, and other assets required to manufacture the end product.
b) The Gross Fixed Capital Investment shall be considered to decide the category of the project.
c) Assets acquired and paid for after coming into force of the Industrial Policy 2015 of the Government of Gujarat (i.e. on or after 01-01-2015) and within the time period specified in this resolution for completion of the investment, shall be considered for determining the gross fixed capital investment.
5. Eligible Fixed Capital Investment
Eligible Fixed Capital Investment means investment made on or after 01-01-2015 and on or before the date specified for completion of the investment, in –
a) Land: The actual purchase price as per the registered document of the land or allotment price of GIDC / industrial park or the price calculated as per the prevailing Jantri rate, whichever is lower, shall be considered as the cost of land for the project, plus stamp duty and registration fee.
b) New Building: A New Building means a new building constructed, or the acquisition of a new and unused building, for the project, including administrative building. The cost of a new building shall be calculated as per the actual cost or the Schedule of Rates (SOR) of the relevant year of the R&B department of the State Government, whichever is lower.
c) Plant and Machinery: Plant and machinery means new plant and machinery, and imported second hand plant and machinery having usable life for at least further ten years which is duly certified by Chartered Engineer, utilities, dies and moulds, including cost of transportation, foundation, erection, installation and electrification, capitalized under the head of plant and machinery. The electrification cost will include the cost of sub-station and transformer installed by the industrial unit.
Plant and machinery shall include:
1. Plant for non-conventional energy;
2. Vehicles used for transportation only within the premises of the industrial unit, and material handling equipment exclusively used in transporting goods within such premises;
3. Plant for captive power generation/co-generation;
4. Plant for desalination of sea water or purification of water;
5. Plant for pollution control measures, including facility for collection, treatment, disposal of effluent or solid/hazardous waste;
6. Diesel Generating sets of capacity not more than 50% of the connected electric load or 25 MW, whichever is less.
d) Other project related construction/ infrastructure: Expenditure incurred for the following items will also be considered to determine the eligibility under this head:
1) Residential colony, hospital, school or sports facilities created for workers and staff of the industrial unit;
2) Feeder road to the industrial unit from the nearest approach road;
3) Dedicated facilities created for carrying water, gas, raw material required by the project through pipeline;
4) Non-refundable deposit paid to electricity company for transmission of electricity from the nearest sub-station;
5) Expenditure on electronic telephone exchange and laying of telecommunication cables;
6) Construction of building for bank or post office, if provided by the unit without any charge;
7) Training Centre to train local people for employment in the project and Skill Development Centre;
8) Expenditure on transport facilities, such as buses, for conveyance of workers from nearby villages/towns to the factory premises.
9) Compound wall and gates, security cabins, internal roads, bore well, water tank, internal pipeline network for water and gas, and other related constructions
10) The cost incurred in acquiring technology, design and drawings, patents, limited to 10% of the project cost.
e) Ineligible Capital Expenditure: The following expenditure shall not be considered for calculating the eligible fixed capital investment:
1. Working capital
4. Preliminary and pre-operative expenses
5. Indigenous second hand plantand machinery
7. Power generation, except for captive use
6. Time period for consideration of eligible fixed capital investment
The assets acquired and paid for from the date of coming into force of the Industrial Policy 2015 of the Government of Gujarat (i.e. on or after 1/1/2015) till the time period specified below shall be considered for determining the gross fixed capital investment and the eligible fixed capital investment.
|1||Ultra Mega Industrial Undertaking||24 months from the DOCP|
|2||Mega Industrial Undertaking||18 months from the DOCP|
|3||Large Industrial Undertaking||15 months from the DOCP|
|4||MSME Industrial Undertaking||12 months from the DOCP|
DOCP: Date of Commencement of Production
7. Category-wise classification of talukas and ineligible industries
8. Quantum of Incentive
The percentage of eligible fixed capital investment entitled for incentive, the percentage of net SGST for reimbursement, and the period from the date of availment of incentive shall be as prescribed in the table below:
|Category of taluka||% of eligible fixed capital investment entitled for incentive||% of net SGST reimbursement to the unit||% of net SGST to be paid to government||Incentive period (no. of years)|
As per GR No. GST/102017/2218/CH dated 3rd October, 2017, government has stated that the VAT incentive will be replaced by the SGST incentive.
In case of eligible period starting and ending in between a financial year, the ceiling limit for that financial year will be fixed in proportion to the annual eligible limit. So, SGST reimbursement in one financial year will not exceed 1/10th of total amount of eligible incentive. Carry forward of incentive is not available
Net SGST: Net SGST means the tax including Additional Tax paid on sale of product after adjusting the tax credit of tax
9. Conditions for availing incentive
a. The incentive shall be available in the form of reimbursement only.
b. The eligible industrial undertaking shall manufacture the goods on its own for which it is eligible for incentive.
c. The eligible industrial undertaking shall remain in production during the incentive period.
d. The eligible industrial undertaking shall have to make e-payment and submit e-returns.
e. An industrial undertaking that has availed incentive under the scheme shall be required to employ persons domiciled in Gujarat to the extent of at least 85% of its total number of employees. The employment of persons domiciled in Gujarat in managerial and supervisory capacity shall not be less than 60% of the number of persons employed by the enterprise in managerial and supervisory capacity, subject to the requirement of employing at least 85% of the total number of employees from persons domiciled in Gujarat.
The industrial undertaking shall be required to submit a list of persons employed and such other information required for verification of having satisfied this condition, before the sanction of incentives under the scheme.
f. An industrial undertaking that has availed similar incentive as provided under this scheme under any other scheme of the state government shall not be eligible for the incentive under this scheme.
However, the industrial undertaking may avail similar incentives under a scheme of the central government.
g. Any investment made by an existing industrial undertaking for renovation, modernization, rehabilitation, or rationalization will not be eligible for incentive under this resolution.
h. An industrial undertaking that has availed incentive under this scheme shall install and effectively operate and maintain pollution control measures as per the standards prescribed and approved by the competent authority in this regard.
i. An industrial undertaking that has availed incentive under this scheme shall be required to remain in production continuously till the expiry of the eligible period of incentive. However, if production is discontinued due to reasons beyond the control of the management, the sanctioning authority may condone the period for which production is discontinued after due verification of details and reasons of discontinuation of production and after satisfying itself to the same.
j. The industrial undertaking shall furnish to the Industries Commissioner/General Manager District Industries Centre information regarding production and employment for each financial year within 60 days of the close of the financial year. It shall also furnish information on such other matters that the state government may require from time to time.
k. The Industries Commissioner may separately issue guidelines for the implementation of the scheme.
10. Expansion of existing unit
If the amount of net SGST so paid by the existing industrial units in any of the five consecutive years is lower than the average net SGST paid in the immediately preceding three years from the year in which the industrial undertaking avails incentive under this resolution, then the amount of incentive availed under this resolution shall be reduced to that extent in the year in which the net SGST paid is lower.
11. Illustration explaining SGST refund mechanism
If any company wants to make investment in Vapi which is category III in such case, in following manner refund can be claimed.
Under the ITI-2016 scheme, for unit in category III, the State Government will refund 70% of total capital investment in the entity, over a period of 10 years. The refund will be given by way of 70% of net SGST.
Thus, if Rs. 30 crore is capital investment in a category III, the financial incentives available are as follow:
|Capital investment||30 crore|
|Eligible fixed capital investment||30 * 70% = 21 crore|
|eligible refund per year||2.10 crore|
Hence, unit will be eligible to get refund of Rs. 2.10 crore in each year.
In above case, if unit has made purchases of 50 crore and sale of 95 crore. In such case, SGST paid on purchase @9% will be Rs. 4.5 crore and SGST payable @9% will be Rs. 8.55 crore on sale. In such case, refund calculation will be as follow:
|SGST refund||Amount (in crore)|
|(A) SGST on sale||Rs. 8.55|
|(B) SGST on purchase||Rs. 4.50|
|(C) SGST Paid (A-B)||Rs. 4.05|
|SGST eligibility 70% of (C)||Rs. 2.83|
|Maximum refund eligible||Rs. 2.10|
Hence, total SGST eligible for refund will be Rs. 2.10 crore
(Compiled by CA Pathik Shah (email@example.com / 9870148084)