Maharashtra Package Scheme of Incentives – 2019

Maharashtra is one of the major contributors to Indian Economy. To ensure Sustainable Industrial growth and improve the conducive industrial climate in the State, Maharashtra government had been introducing and amending the Industrial Policies since decades. Package Scheme of Incentives (PSI) is one such policy by the state government which was introduced in 1963 to attract and strength Industrialisation in the state. The policy has under gone various redressals. The latest amendments in the policy were introduced in September 2019. The validity period of Maharashtra Package Scheme of Incentive policy is from 1st April 2019 to 31st March 2024 or till the new Package Scheme of Incentives comes into force. The Incentive policy covers both fiscal and non-fiscal Industrial Incentives to Industries in Maharashtra.

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Salient features of Maharashtra Package Scheme of Incentives – 2019

To attract Industrialisation in the remote area Maharashtra, government has been given industrial incentives in Maharashtra for setting up since 1963. The salient features of the recent Incentive Scheme are as under:

• Validity Period: Maharashtra Package Scheme of Incentive 2019 validity period is From 1st April 2019 to 31st March 2024 or till the new Package Scheme of Incentives comes into force.

• Covered Industrial Sectors : Units in the Private, Cooperative Sector, State Public Sector / Joint Sector Listed in Development and Regulation Act 1951 / Manufacturing Enterprises as defined in MSMED Act 2006 / Information Technology Manufacturing Units registered with MIDC or SEEPZ or Software Technology Parks of India in the State / Bio-technology Manufacturing Units as specified by the Government or Mechanized / Food or Agro Processing Industries, Textile units are covered under Maharashtra Package Scheme of Incentives 2019.

The products banned by Central / State Government i.e. Cigarette, bidi or any other tobacco containing products. Gutka and pan masala manufacturing industries. Beer, liquor manufacturing industries are not eligible for the incentives.

Industrial Incentives in Maharashtra for Medium Small Manufacturing Enterprises (MSMEs), Large Scale Industries (LSI)/ Special LSIs, Mega/Ultra Mega Projects

Depending of the Investment and Employment generation, the Industries in Maharashtra are categorised into MSMEs, Large Scale Industries/ Special LSIs, Mega/Ultra Mega Projects. According to the categories of Industries and the Industrial zone, the industries get benefits under the Maharashtra Package Scheme of Incentives. The Financial/Fiscal Incentives to different types of Industries in the recent PSI 2019 are as under:

Financial Incentives for MSMEs under Package Scheme of Incentive 2019

New/Expansion/diversification project for the MSMEs in B,C,D,D+, Vidarbha, Marathwada, Ratnagiri, Sindhudurg & Dhule, No Industry Districts, Naxalism Affected Areas and Aspirational Districts can avail the Industrial Benefit under Incentive Scheme 2019 if Fixed Capital Investment is upto 50 Cr and unit is as per the MSMED Act 2006.

The total quantum of incentives is linked with the percentage actual eligible Fixed Capital Investment as per the Industrial division. The aggregate fiscal incentives will never exceed the basket of incentives (as percentage of FCI). The incentives will be granted to the units on first-cum-first serve basis.

The maximum ceiling bracket of Incentive as percentage of FCI and the eligibility period (Years) to avail the benefits are as under:

• For Industries under B Taluka: upto 30% disbursement in 7 Years.
• For Industries under C Taluka : upto 40% disbursement in 7 Years
• For Industries under D Taluka : upto 50% disbursement in 10 Years
• For Industries under D+ Taluka : upto 60% disbursement in 10 Years
• For Industries in Vidarbha, Marathwada, Ratnagiri, Sindhudurg & Dhule: upto 80% disbursement in 10 Years.
• For Industries in No Industry Districts, Naxalism Affected Areas and Aspirational Districts: upto 80% disbursement in 10 Years.

Existing/New MSMEs qualifying as Expansion/Diversification unit are eligible to get 80% incentive equivalent to New Units but the eligibility period for such unit for availing would reduce by one year.

Industrial Promotion Subsidy (IPS) to the New/ Expansion would be 100% SGST payable by the unit on the first sale of eligible products billed and delivered within Maharashtra. The disbursement of incentives shall be as per the set guidelines.

Power Tariff Subsidy to the New eligible MSMEs units in B, C, D, D+ Industrial Area of the State for a period of 3 years from the date of commencement of commercial production, for the energy consumed and paid would be Rs 0.50 per unit and Rs 1/- per unit for the Units located in Vidarbha, Marathwada, North Maharashtra and the Districts of Raigad, Ratnagiri and Sindhudurg in Kokan Region, No Industry Districts, Naxalism Affected Areas and Aspirational Districts. Aggregate fiscal incentives provided shall not exceed the basket of incentives (as percentage of FCI). The incentives will be granted to the units on first-cum-first serve basis.

Additional Subsidies to Expansion MSMEs Units

• Upto Rs. 25 Lakhs on additional capital equipment acquired for Technology Up-gradation.
• Upto Rs. 1 Lakh on expenses incurred on quality certification.
• Upto Rs.5 Lakh on additional capital equipment acquired for cleaner production measures.
• Upto Rs. 10 Lakh on the expenses incurred on National patent registration and upto Rs. 20 Lakh on the expenses incurred on International patent registration.
• Upto 1 Lakh on cost of water audit.
• Upto 2 Lakh on cost of energy audit.
• Upto 5 Lakh on the cost of Capital Equipment under the measures to conserve/recycle water.
• Upto 5 Lakh on the cost of additional Capital Equipment for improving energy Efficiency.

Industrial Incentives in Maharashtra for Large Scale Units/ Project/S LSU under Package Scheme of Incentive 2019

Based on the Taluka the investment, Incentive bracket and period of incentive varies. Fixed Capital Investment, Employment generation and the disbursement period of the LSI is as under:

• For Industries under A & B (only LSI) Taluka: minimum Fixed Capital  Investment Rs. 750 Cr but Less than Mega Project investment  or Minimum Employment 1000, Maximum Ceiling Bracket  upto 25% of FCI,  disbursement in 7 Years.
• For Industries under C (only LSI) Taluka: minimum Fixed Capital  Investment  500 Cr but Less than Mega Project investment  or Minimum Employment 700,Maximum Ceiling Bracket  upto 40% of FCI,  disbursement in 7 Years.

• For Industries under D (only LSI) Taluka: minimum Fixed Capital  Investment  250 Cr but Less than Mega Project investment  or Minimum Employment 500,Maximum Ceiling Bracket  upto 60% of FCI,  disbursement in 7 Years.

• For Industries under D+ (only LSI) Taluka: minimum Fixed Capital  Investment  150 Cr but Less than Mega Project investment   or Minimum Employment 400, Maximum Ceiling Bracket  upto 70% of FCI,  disbursement in 7 Years.

• For Industries under Vidarbha, Marathwada,Ratnagiri, Sindhudurg & Dhule (only LSI) Taluka: minimum Fixed Capital  Investment  100 Cr or Less than Mega Project investment  but Minimum Employment 300,Maximum Ceiling Bracket  upto 80% of FCI,  disbursement in 9 Years.

• For Industries under No Industry Districts, Naxalism Affected Areas and Aspirational Districts** (only LSI) Taluka: minimum Fixed Capital  Investment  100 Cr but Less than Mega Project investment   or Minimum Employment 250,Maximum Ceiling Bracket  upto 100% of FCI,  disbursement in 9 Years.

The total quantum of incentive is linked upto the actual eligible Fixed Capital Investment. The fiscal incentive does not exceed the bracket of incentive. The eligible unit that have applied and undergone commercial production in the first year of policy will get full basket of eligible incentive. 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.

Expansion / Diversification Units: Units will be eligible to get the incentives for Expansion / Diversification, equivalent to 80% of the incentives admissible for New Units. The eligibility period for availing of the incentives will be reduced by one year than that admissible to a New Unit in case of Expansion / Diversification Units.

Industrial Promotional Subsidy (IPS): The eligible New / Expansion / Diversification Large Scale Industries, which are set up at single location will be eligible for IPS. Eligible LSI units would avail Investment Promotion Subsidy (IPS) on 50 % of Gross SGST payable by the unit on the first sale of eligible product(s) billed and delivered within Maharashtra. & Special LSI @ 40 % of NET SGST paid by the unit on the first sale of eligible product(s) billed and delivered within Maharashtra. However, units falling under this category located in “A” & “B” Zones will not be eligible for Incentives.

Exemption from Electricity Duty : All Eligible New Units in Group C, D, and D+ areas ,No-Industry District(s),Aspirational Districts and Naxalism affected Area will be exempted from payment of Electricity Duty during applicable eligibility period,( Incentive Availment Period).  In Group A and B areas, only eligible 100% Export Oriented Units (EOUs), IT/BT Manufacturing units will get exemption  of Electricity Duty for a period of 7 Years.

Interest Subsidy: Eligible New MSMEs  will be eligible for interest subsidy in respect of interest actually paid to the Banks and Public Financial Institutions (excluding unsecured loans, private loans / borrowings, loans from NBFCs etc.) for claim period, on the amount of term loans taken for acquisition of new Fixed Assets required for the project accepted by the implementing agency. The amount of interest subsidy will be calculated @ effective rate of interest, after deducting the interest subsidy receivable from any agency of the State Government or under any Govt. of India Scheme and the penal / compound interest or 5 % per annum, whichever is less. The quantum of interest subsidy payable to the eligible unit every year will not exceed the bills paid for electricity consumed during the relevant year.

Exemption from Electricity Duty : All Eligible New Units in Group C, D, and D+ areas, No-Industry District(s), Aspirational Districts and Naxalism affected Area will be exempted from payment of Electricity Duty during applicable eligibility period. In Group A and B areas, only eligible 100% Export Oriented Units, IT/BT manufacturing  will be exempted from payment of Electricity Duty for a period of 7 Years.

Waiver of Stamp Duty : Stamp duty will be exempted for the New/Existing/ Expansion / Diversification unit on the acquisition of Land within the Investment Period in Group C, D, D+ Talukas, No Industry Districts, Aspirational Districts and Naxalism affected areas for acquiring land (including assignment of lease rights and sale certificate) and for term loan purposes.

Stamp duty will be exempted for the New/Existing/ Expansion / Diversification unit  within the Investment Period in Group A and B for BT/IT Manufacturing Units in Public IT / BT Parks is 100%, in Private IT/BT Parks is 75%.

Incentives for Mega Projects/ Ultra Mega Projects

The sanction customized package scheme of incentives and even offer special / extra incentives for prestigious Mega Projects I Ultra Mega Projects are done by authorised agency. Based on the Taluka the Investment / Employment generation are as under :

• For Industries in A & B Taluka: minimum Fixed Capital Investment  Rs. 1500  Cr or  Minimum Employment 2000.
• For Industries in C Taluka: minimum Fixed Capital Investment Rs. 1000 Cr or  Minimum Employment 1500.
• For Industries in D Taluka: minimum Fixed Capital Investment  Rs. 750  Cr or  Minimum Employment 1000.
• For Industries in D+ Taluka: minimum Fixed Capital Investment  Rs. 500  Cr or  Minimum Employment 750.
• For Industries in Vidarbha, Marathwada,Ratnagiri, Sindhudurg & DhuleTaluka: minimum Fixed Capital  Investment  Rs. 350  Cr or  Minimum Employment 500.
• For Industries in No Industry Districts, Naxalism Affected Areas and Aspirational DistrictsTaluka: minimum Fixed Capital  Investment  Rs. 200  Cr or  Minimum Employment 350.

The investment in Captive Power Plant including solar power plant would be considered for determining the qualifying criteria for eligibility as Mega Project /Ultra Mega Project. But, shall not be incentivized (However Investment in captive power plant will be limited to 20% of total project cost). 100% Captive Process Vendor (CPV) investment can be considered as a part of admissible FCI. However, CPV investment will not be counted for determining qualifying criteria as Mega/ Ultra Mega Projects.

If Ultra-Mega/ Mega projects is based on employment criteria, Minimum Direct Employment to be generated  within a period of two years from the date of commercial production. 80% of the employment to be  Local.

The projects based on employment criteria have to maintain the qualifying direct employment on rolls of the company throughout the year. If the employment criteria is not maintained for any period of the year, then Industrial Promotion Subsidy shall not be admissible for such year(s).

The financial refunds / incentives to an industrial units from all sources put together shall not exceed admissible Fixed Capital Investment as per respective Taluka category.

Yearly Cap for the Package Scheme of Incentives 2019

Yearly disbursement limit would be the differential amount of Sanctioned Total Quantum of Incentive divided by the number of years as per the applicable Eligibility period. The sanctioned amount for the year can be carry forwards in case more than the disbursement limit. Deficit differential will not be carried forward.

Procedure for Application under Maharashtra PSI- 2019

Any New / Expansion / Diversification unit can apply for Package Scheme of Incentive 2019 subject to effective date of the policy (before March 2024) and competition effective steps i.e. commencement of commercial production along with acquisition of fixed assets within the investment period (Submission of the application) with supportive documents.

• Assets acquired prior to and beyond the investment period will not be considered eligible for incentives. Only investment in acquisition of vacant Land acquired prior to policy period, investment period or submission of valid application would be part of eligible Fixed Capital Investment if no incentives were availed under any scheme on the said land.
• Extension in the investment period is only possible if there is a delay in the process of government agencies or some unavoidable natural calamities.
• Effective steps completed before April 2019 but the unit hasn’t submitted application under PSI 2013, can submit the application in PSI 2019. The unit would be avail the Lower incentive after comparing PSI 2013 and PSI 2019. For such units incentives will be sanctioned by considering the investment after 1st April, 2019.
• For Mega Project, wherein a customized package has been approved by the authorities but the Unit has completed/ not completed the effective steps within the period of PSI – 2013 and has not applied  for Eligibility Certificate, such Mega Project will be eligible for approved customized package only. The Unit have to complete the effective steps and file an application with the Implementing Agency within the approved Investment period.
• A valid application for eligibility shall be submitted on or before the date of commencement of commercial production, if there is any delay, the Eligibility Certificate period and entitlement amount will be curtailed proportionately. The yearly quantum of incentives permissible shall be equal to curtailed incentive amount divided by curtailed eligibility period.
• Eligibility Certificate will be issued with effect from the date of commencement of commercial production by the Eligible Unit. The date of commencement of commercial production will be determined by the supportive documents (Electricity bill, MPCB Consent to operate etc…)
• Expansion / Diversification of the existing unit can claim for Incentives under PSI 2019.  The ratio of additional fixed capital investment to the total gross fixed capital investment of the existing unit would be provided. Only two Expansion/Diversification are permitted.
• Incentives can only be claimed once a unit has Eligibility Certificate in place. The Implementing Agency issues Eligibility Certificate to the Eligible Unit within 30 days to the Unit complying with the stipulations of the PSI – 2019 and submitting documentary evidence.

Monitoring and Review

Eligible unit for the Maharashtra package Scheme of Incentive have to strictly follow their approved production activity and investments in order to avail the incentives.  With a view to monitor the production activities of and the establishment Investment Fixed Assets, the units have to periodically submit the Production and Sale Information, Audit Report, Balance Sheet, any change in the constitution, operations related information etc. .. The breach in providing the information may lead to cancellation and repayment of the incentive to the implementing agencies.

When Eligible Unit reaches the relevant ceilings of Incentive prescribed in the Eligibility Certificate prior to expiry of the Eligibility Certificate period, the Eligibility Certificate Stands Cancelled.

Incentives in case the Transfer of Existing Unit to New Entity

If the existing unit in B, C, D, D+ Industrial Areas is transferred during the Incentive period with/without/partly availing the incentive. Incentive to the New Unit would be disbursed as under:

• Transfer of Industry with/without Plant and Machinery, without starting industrial activity and availing incentive. The transferee acquires additional fixed assets and starts production.

The incentives would be related and restricted only to the additional Fixed Capital Investment by the new entity, if otherwise eligible as per eligibility criteria of PSI 2019 (i.e. the investment in the fixed assets of the Existing Unit shall be excluded).

• Incentive is availed partly and the Unit is transferred.

The Transferee will be considered eligible as a New Unit subject to Transferor repaying incentives availed without interest or Transferee ( for availing remaining amount) providing undertaking to the authorities on repayment of the amount received by Transferor and Transferee if the unit is closed during Eligibility Certificate / Operative period.

• Period of incentives (Earlier Scheme 2013) of the Existing Unit expired but operative period of the agreement not expired.

The Transferee will be considered eligible as a New Unit provided the incentives availed by the Transferor are repaid. The incentive up to the corresponding ceiling shall be related and restricted only to the additional Fixed Capital Investment by the Eligible Unit (i.e. the investment in the fixed assets of the existing unit shall be excluded).

• A New Unit eligible under the 2019 Scheme before availing any of the incentives is transferred.

Eligible as a New Unit under PSI 2019.

• An Existing Unit which has availed incentives, Bank / Financial Institution(s) take over the assets of the unit and transfer the same in realization of their dues and the Transferee after adding further fixed assets starts production as a New Unit.
  Incentive up to the corresponding ceilings shall be related and restricted only to the additional Fixed Capital Investment made by the Transferee (i.e. investment in the fixed assets of the Existing Unit shall be excluded).

• An Existing Unit which has availed incentives partly, Bank / Financial Institution(s) take over the assets of the unit and transfer the same in realization of their dues and the Transferee re-starts production.

Incentives up to the eligible Fixed Capital Investment as per Eligibility Certificate of existing unit. If the new unit is investing extra additional investment then incentives can only be extended for the amount exceeding the original eligible FCI.

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