Maharashtra Government Announces Package Scheme of Incentives – 2019

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The Maharashtra Government had announced the New Industrial Policy – 2019 in April this year to ensure sustained industrial growth and strengthen the ‘Magnetic Maharashtra’ brand. In line with the said vision, the much-awaited Government Resolution in relation to Package Scheme of Incentives (PSI) 2019 was issued on September 16, 2019.

Key Highlights
Announced on 16-09-2019, PSI 2019 has been made effective retrospectively from 01-04-2019 and it will remain in operation upto 31-03-2024. Certain thrust sectors have been identified which cover industries like aerospace and defence, logistics & warehousing, minerals, forest-based industries, textile machine manufacturing, green energy, amongst others.

The incentives provided in the scheme have been categorised for MSME sector, large scale units (LSI), special large scale units, mega projects and ultra mega projects. The permissible investment period for (i) MSME sector, (ii) LSI & Special LSI units and (iii) Mega- Ultra Mega projects is fixed at 3 years, 4 years and 5 years respectively.

Incentives for MSMEs
As per the MSME Act 2006, the units with gross investment in plant and machinery upto Rs 10 crore are classified as MSME. Such units will be eligible for benefits specified for MSMEs under PSI 2019. Additionally, for PSI 2019, units having fixed capital investment (FCI) (new/expansion) upto Rs 50 crore will also be classified as MSME.

Benefits restricted to eligible new MSME units

  • Interest subsidy on term loan @ 5% which is in line with the previous scheme i.e. PSI 2013.
  • Specified regions (which covers Vidarbha region) shall be exempted from payment of electricity duty.
  • Power tariff refund @ Rs 1 unit for period of three years from commercial production is in line with the previous scheme. MSMEs under expansion will be eligible to get incentives equivalent to 80% (as against 75% under PSI 2013) of incentives admissible for new units. The eligibility period will be reduced by one year compared to new unit which is in line with the previous scheme.

Following incentives will be offered to the eligible MSME – both new and expansion:

* Industrial Promotion Subsidy (IPS) on 100% of Gross SGST payable on first sale of product billed and delivered within Maharashtra.

* Stamp duty exemption of purchase of land and term loan purpose.

Incentives for LSI and Special LSI

  • For Vidarbha, Marathwada, Ratnagiri, Sindhudurg and Dhule, the threshold to qualify as ‘Large Scale Unit’ has been fixed at Rs 100 crore (Eligible FCI) or direct employment to 300 people. The direct employment has to be achieved within a period of two years from commercial production and 80% of such employees should be local persons. In the earlier scheme i.e. PSI 2013, the units having gross investment in plant and machinery above Rs 10 crore were classified as large scale unit.
  • New concept under the head ‘Special LSI’ has been introduced in PSI 2019. The category covers units having FCI of more than Rs 50 crore but less than Rs 100 crore (i.e. threshold for LSI).
  • It is mentioned that the incentives will be granted to LSI and Special LSI units on first-cum-first serve basis. This also indicates that going forward the units in this segment would not be provided with incentives if internal threshold (if any) decided by government is achieved.
  • The units applying for incentives and going into commercial production in the first year of policy period will be given full basket of eligible incentives. If the unit applies or goes into commercial production in subsequent years of the policy period, the ceiling of basket of incentives will be reduced by 5% for each year of delay in going into commercial production. This again supports the interpretation of phasing out of incentives for LSI.
  • The LSI / Special LSI under expansion will be eligible to get incentives equivalent to 80% (as against 75% under PSI 2013) of incentives admissible for new units. The eligibility period will be reduced by one year compared to new unit which is in line with the previous scheme.
  • Further, the eligible LSI / Special LSI (new / expansion) will be eligible for stamp duty exemption on purchase of land and term loan purpose.
  • There has been impressive increase in maximum ceiling of incentives for LSI/Special LSI as compared to previous scheme. In PSI 2013, the maximum ceiling for this category was 50% of eligible FCI.
  • The eligible LSI will be offered IPS on 50% of Gross SGST payable on first sale of product billed and delivered within Maharashtra.
  • The eligible Special LSI will be offered IPS on 40% of net SGST paid on first sale of product billed and delivered within Maharashtra. It seems that the unit falling in this category will be eligible to meagre incentives compared to MSME or LSI units.
  • The eligible new LSI / Special LSI in specified regions (which covers Vidarbha region) shall be exempted from payment of electricity duty.

Mega Projects
For Vidarbha, Marathwada, Ratnagiri, Sindhudurg and Dhule, the threshold to qualify as ‘Mega Project’ has been fixed at Rs 350 crore (eligible FCI) or direct employment to 500 people. Similar to condition for LSI, the direct employment has to be achieved within period of two years from commercial production and 80% of such employees should be local persons.

Other Stipulations (all the category of units)
The amount of incentives to be disbursed to the MSMEs, LSI, Special LSI and Mega / Ultra Mega Units every year will be limited to the total quantum of incentives divided by the number of years as per the applicable eligibility period.

An application for eligibility under PSI – 2019 shall be submitted to the implementing agency by an eligible unit only after it has taken all the effective steps but not later than the March 31, 2024.

An Eligibility Certificate (‘EC’) under the PSI-2019 will be issued by the implementing agency after ascertaining that the eligible unit has complied with the provisions of the scheme and has commenced its commercial production. While detailed analysis will be required to identify the actual benefit available to an applicant, primarily it can be said that PSI 2019 delivers the promise of the state government of inclusive economic growth with emphasis on balanced regional development and employment generation. The incentives in form of power, subsidies, stamp duty and electricity duty exemptions and subsidy on SGST are lucrative and have potential of attracting industries in Vidarbha.

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