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Package Scheme of Incentives, 2007

GOVERNMENT OF MAHARASHTRA INDUSTRIES, ENERGY AND LABOUR DEPARTMENT

PREAMBLE
In order to encourage the dispersal of industries to the less developed areas of the State, Government has been giving a Package of Incentives to New / Expansion Units set up in the developing region of the State since 1964 under a Scheme popularly known as the Package Scheme of Incentives.
The Package Scheme of Incentives, introduced in 1964, was amended from time to time. The last amended Scheme, commonly known as the 2001 Scheme is operative from the 1st April, 2001 to 31st March, 2007.
The State has declared the new Industrial, Investment, Infrastructure Policy 2006 to ensure sustained industrial growth through innovative initiatives for development of key potential sectors and further improving the conducive industrial climate in the State, for providing the global competitive edge to the State’s industry.
The policy envisages grant of fiscal incentives to achieve higher and sustainable economic growth with emphasis on balanced Regional Development and Employment Generation through Greater Private and Public Investment in industrial development. The Package Scheme of Incentives 2007 outlines the eligibility criteria, quantum of incentives and monitoring mechanism for administering the incentives.
RESOLUTION
The Package Scheme of Incentives as last modified was continued upto the 31st March, 2007 by Government Resolution, Industries, Energy and Labour Department No. IDL-1006/(CR-83)/IND-8, dated 3rd May, 2006. Now, the Government is pleased to direct that the Package Scheme of Incentives 2007 will be brought into effect from the 1st April 2007 to 31st March,2011, with the following provisions:
1. Scope
1.1 Coverage under the 2007 Scheme:
The following categories of Eligible Industrial Units in the Private Sector, State Public Sector/ Joint Sector and the Co-operative Sector but not in the Central Public Sector will be considered for incentives under the 2007 Scheme
i) Industries listed in the First Schedule of the Industries (Development and Regulation) Act, 1951, as amended from time to time
ii) Manufacturing Enterprises as defined in the MSMED Act, 2006.
iii) Information Technology (IT) units registered with Directorate of Industries or MIDC or Development Commissioner (SEEPZ) or STPI in the State,
iv) Poultry
v) Cold Storages and Agro Industries,
vi) Biotechnology (BT) units as specified by Government from time to time, which are outside the purview of any registering authority mentioned above.
Explanation: In the case of poultry, only capital expenditure on land, building and equipment will be considered eligible for incentives.
1.2 Period of Operation:
The 2007 Scheme, as may be amended by the Government from time to time, shall remain in operation from the 1st April, 2007 to 31st March, 2011.
1.3 Classification of Areas:
For the purpose of the 2007 Scheme, the classification of the areas of the State shall be as indicated below.
(i) Group A: comprising the developed areas, viz. Mumbai Metropolitan Region (MMR) and Pune Metropolitan Region (PMR).
(ii) Group B: comprising the areas where some development has taken place.
(iii) Group C: comprising the areas, which are less developed than those covered under Group B.
(iv) Group D: comprising the lesser-developed areas of the State not covered under Group A/ Group B/ Group C.
(v) Group D+: comprising those least developed areas not covered under Group A/Group B/Group C/Group D
(vi) No Industry District : Not covered under Group A / B/ C/ D & D+
The detailed talukawise classification of the areas of the State made accordingly has been indicated in Annexure I to this Resolution.
2. Implementing Agencies
The Implementing Agencies for the purpose of the 2007 Scheme shall be as follows:
2.1 The Joint Director of Industries (Mumbai Metropolitan Region) [JDI (MMR)] in respect of Mumbai and Mumbai Suburban Districts and concerned District Industries Centre (DICs) for the Micro & Small Manufacturing Enterprises as specified in the MSMED Act, 2006 and activities as specified under the provision of Para 1.1 (iii to vi) wherein investment in equipments at par with Micro & Small Manufacturing Enterprises.
Explanation:
(a) The eligible unit will continue to remain with the JDI (MMR) or DIC which had issued an Eligibility Certificate (EC) in favour of the Eligible Unit, for the purposes of incentives and other connected matters, even if the Eligible Unit ceases to be a Micro & Small Manufacturing Enterprises or exceeds the investment ceiling prescribed for Micro & Small Manufacturing Enterprises. In other words, even when an Eligible Micro & Small Manufacturing Enterprises graduates to Medium manufacturing enterprises/Large Scale Sector, the Eligible Unit shall continue to remain with the JDI (MMR) / DIC, which issued the EC in favour of the Unit.
(b) Where an Eligible Unit has been issued an EC under any of the Schemes prior to the 1993 Scheme by a Regional Development Corporation (RDC), it will be covered for benefits under the 2007 Scheme according to its status as Micro & Small Manufacturing Enterprises or Large Scale Industry (LSI) consequential to new/expansion/diversification project. It shall accordingly file its application with the concerned Implementing Agency.
2.2 The Regional Joint Directors of respective regions and the Sub-Regional Officer i.e. Superintending Industries Officer, Nanded Sub-Region for Medium Manufacturing Enterprises as defined in the MSMED Act, 2006 and activities as per the provision 1.1 (iii to vi) wherein investment in equipment at par with the Medium Manufacturing Enterprises as defined in MSMED Act, 2006.
2.3 Directorate of Industries for Medium Enterprises other than as specified in MSMED Act, 2006 / Large Scale Industries / Mega Projects and the activities as per the provisions 1.1 (iii to vi) wherein the investment in equipment is more than the medium manufacturing enterprises as specified in MSMED Act, 2006.
3. Promotional and Financial Incentives:
3.1 Industrial Promotion Subsidy: (IPS)
A) New Micro & Small Manufacturing Enterprises, Medium Enterprises / LSI (including IT/ BT units) : New projects, which are set up in these categories in different parts of the State, will be eligible for Industrial Promotion Subsidy (IPS). The quantum of subsidy will be linked to the Fixed Capital Investment. Payment of IPS every year will be equal to 25% of any Relevant Taxes paid by the eligible unit to the State or to any of its departments or agencies.

B) Expansion units: Existing Micro & Small Manufacturing Enterprises, Medium Enterprises / LSI units making additional investment to the extent of 25% or more over the Gross Fixed Capital investment, as on the last date of the previous financial year, for expansion, diversification will also be eligible to get the Industrial Promotion Subsidy equivalent to 75% of the incentives admissible for new units. The admissible period for availing the subsidy will be reduced by one year in the respective category and area. Explanation: The Zero VAT Units will be eligible for getting employment based incentive as proposed for low HDI districts in the form of 75% reimbursement of expenditure on account of contribution towards Employees State Insurance (ESI) and Employees Provident Fund (EPF) Scheme for a period of 5 years However the quantum of incentives for these units will be limited to 20%, 30%, 40%, 50%, 60% of FCI in “B”, “C”, “D”, “D+”, No Industry District respectively.
3.2 Interest subsidy:
All new eligible Micro & Small Manufacturing Enterprises in textile, hosiery, knitwear and readymade garment sector will be eligible for interest subsidy in addition to Industrial Promotion Subsidy. The Interest Subsidy will be payable only on the interest actually paid to the Banks and Public Financial Institutions on the term loan for acquisition of fixed capital assets. The amount of interest subsidy will be effective rate of interest (after deducting interest subsidy receivable any institution / under any Govt. of India scheme or 5 % p.a. whichever is less). The quantum and period for availing this incentive will be as stated in the table below:
3.3 Exemption from Electricity Duty:
Eligible new units in C, D, and D+ areas and No-Industry District(s) will be exempted from payment of Electricity Duty for a period of 15 years. In other parts of the State, 100% Export Oriented Units (EOUs), Information Technology (IT) and Bio-Technology (BT) units will also be exempted from payment of Electricity Duty for a period of 10 years. Necessary Notification under the provision of the Electricity Duty Act 1958 will be issued separately by Energy Department.
3.4 Waiver of Stamp Duty:
New as well as units undertaking Expansion/ Diversification will be exempted from payment of Stamp duty up to 31st March 2011 in “C, D, D+ Talukas and No Industry Districts. However, in A and B areas, stamp duty exemption would be available as given below:
• BT and IT units in public Parks : 100%
• BT and IT units in private Parks : 75%
• Mega Projects : 50%

Necessary Notification under the provision of the Bombay Stamp Act 1958 will be issued separately by Revenue & Forest Department.
3.5 Royalty Refund:
All eligible units, new as well as units undertaking expansion in Vidarbha region will be eligible for refund of royalty paid on purchase of minerals from mine owners within the State of Maharashtra for a period of five years from the date of commencement of commercial production.
3.6 Refund of Octroi / Entry Tax in lieu of Octroi:
3.6.1 An eligible unit, after it goes into commercial production, will be entitled to refund of Octroi duty / Entry Tax (in lieu of Octroi), account based cess or other levy charged instead of or in lieu of Octroi payable and paid to the local authority on import of all items required by the eligible unit. This incentive will be admissible in the form of a grant restricted to 100% of the admissible fixed capital investment of the eligible unit for a period 5 / 7 / 9/ 12 years respectively in the B / C / D / D+ areas. In respect of No Industry District areas, however, the period will be 15 years.
3.6.2 The period of eligibility for refund of the Octroi / Entry Tax in lieu of Octroi, account based cess or other levy charged instead of or in lieu of Octroi shall be from the date of commencement of commercial production.
3.7 Strengthening the Micro, Small and Medium Manufacturing Enterprises :
The followings are the incentives to promote quality competitiveness, research and development and technology upgradation:
• 5% subsidy on capital equipment for technology up gradation subject to • maximum of Rs.25 lakh
• 50% subsidy on the expenses incurred for quality certification limited to • Rs. 1 Lakh
• 25% subsidy on cleaner production measures limited to Rs.5 Lakhs
• 50% subsidy on the expenses incurred for patent registration limited to Rs. 5 Lakh

Explanation: A Committee under the Chairmanship of Secretary (Industries) will decide the eligibility and sanction the above incentives.
3.8 Additional Incentives:
The eligible Micro & Small Manufacturing Enterprises coming up in Industrial Clusters / Parks to be notified by the State Government and in identified thrust areas i.e Agro based Industries, Textile, Auto & Auto Components, Electronics Products, Pharmaceuticals, Gems & Jewellery, Information Technology, I.T. enabled Services and Bio-technology will be eligible for the IPS applicable to the one step higher incentive category under clause 5.1
Explanation: A Committee under the Chairmanship of Secretary (Industries) will finalise / decide the clusters / parks in above categories.
3.9 Special Incentives for Units coming up in the low Human Development Index Districts:
New units setting up facilities in notified districts (Annexure-II) and employing at least 75% local persons as defined in the Employment of Local Persons Policy will be offered 75% reimbursement of expenditure on account of contribution towards Employees State Insurance (ESI) and Employees Provident Fund (EPF) Scheme for a period of 5 years. However these benefits will be limited to 25% of FCI. The amount of reimbursement will be paid annually based on minimum statutory limit subject to the condition that the unit has paid its contribution towards ESI & EPF on the due dates.
3.10 Mega Projects:
The quantum of incentives within the approved limit will be decided by the High Power Committee under the chairmanship of Chief Secretary, Government of Maharashtra. The Infrastructure Committee under the chairmanship of the Chief Minister of Maharashtra will have the power to customise and offer special / extra incentives for the prestigious Mega Projects on a case to case basis.
4. Committee:
A Committee as constituted comprising of the following members shall be authorised to interpret and decide all the issues involving the PSI 2007 and earlier Scheme.
1. Secretary, Industries Department Chairman
2. Secretary (Finance) Member
3. Commissioner of Sales Tax Member
4. Development Commissioner (Industries) Member
5. Joint Director of Industries (PSI) Member Secretary


The committee may if it so desires seek the advice of expert from relevant field before taking decision on the subject matter.
FAQs on Package Scheme of Incentives
Which is the current Package Scheme of Incentives?
Normally any Package Scheme of Incentives is valid for a period of 5 years. The current scheme is valid from 01.04.2007 to 31.03.2012 and is called the Package Scheme of Incentives, 2007 (PSI-2007).
Which activities are eligible under the present scheme?
Please refer to para 1(1.1) of PSI-2007 for list of eligible activities. New and Existing Manufacturing Enterprises that have taken at least one effective step on or after 01.04.2007 are eligible under PSI-2007.
What are Effective Steps?
Effective possession of land (registered sale / lease deed with physical and legal possession), constitution formation, and procurement of Industrial Entrepreneur’s Memorandum (IEM) or filing of memorandum under MSMEI Act with the concerned District Industries Center (DIC), constitute the effective steps under PSI-2007.
Where application should be filed?
1. For eligible micro and small manufacturing enterprises, DIC of the district in which the manufacturing facility is located or proposed to be set-up.
2. For eligible medium manufacturing enterprises, the implementing agency is the concerned Regional office of the Directorate of Industries.
3. All large and mega eligible units will apply to the Directorate of Industries, Mumbai. The contact details of the implementing agency are provided in the details available at “Organisational setup” on the Home page.
What is the procedure for availing benefits under PSI-2007?
Application in ‘prescribed form’ (Form-I for New Unit and Form-IV for Expansion/diversification) together with documents establishing completion of Effective steps and a detailed project report (list of specific documents to be enclosed) is provided with the application form should be submitted, to the concerned Implementing Agency. Upon start of commercial production, documents establishing commencement of production, and creation of assets should be submitted (list provided with the application form) to the Implementing Agency. Upon satisfying itself about the eligibility of unit, the implementing agency shall issue Eligibility Certificate (EC) specifying the quantum of admissible incentives and other relevant details.

Based on the EC, the Sales Tax Department shall issue and Identification Certificate (IC) for the purpose of case of reconciliation of taxes paid.

Subsequent to issue of EC, annual claims sanction of Industrial Promotion Subsidy (IPS), Octroi duty refund, Royalty refund, Reimbursement of EPF & ESI (low HDI districts and zero-VAT units only), and Interest subsidy whichever applicable shall be filed with the Implementing agency. The procedure for filing of such claims is provided on this web-site.

What is “Operative Period”?
The period for which an Eligibility Certificate holder requires to fulfill all the terms and conditions of the EC and agreements executes with the Implementing Agency, is called the “Operative Period”. The operative period in force at present is as under;.

Micro & Small Enterprises - 5 years
Medium/ Large Enterprises - 7 years
Large Enterprises - 10 years

Please go through the Government Resolution No.PSI-2108/CR-35/Ind-8, dated 21st May, 2008 issued by the Department of Industries, Government of Maharashtra to obtain complete details on this issue.
What are “Procedural Rules” under PSI-2007?
The Procedural Rules 1980 provide details of procedural aspects under PSI-2007. Although Procedural Rules 1980 are in force today, a number of sections have been modified while some are no more relevant to the present scheme. In case of any doubt or classification, please contact the Implementing Agency.
Which special benefits are available to eligible enterprises in Low HDI districts?
In addition to regular incentives available to all eligible units, New units setting up facilities in notified low HDI districts (Gadchiroli, Yavatmal, Jalna, Nandurbar, Washim, Dhule, Nanded, Osmanabad, Buldhana, Chandrapur), and employing at least 75% local persons as defined in the Employment of Local Persons Policy, will be offered 75% reimbursement of expenditure on account of contribution towards Employees State Insurance (ESI) and Employees Provident Fund (EPF) Scheme for a period of 5 years.
Source: Government of Maharashtra, Industries, Energy and Labour Department