In the present environment of globalisation, when a challenge to stand in the international competition arose for small scale industries, an emphasis is laid in the New Industrial Policy – 2000 on making small scale industries healthy, to enable them to stand in the competition by achieving world class productivity and quality and to extend assistance for developing facilities for balanced growth and to create employment opportunities in rural and under-developed areas of the state. With the efforts of the Central Government, all the States have accepted the decision to discontinue sales tax incentives with effect from 1.1.2000, to avoid the situation arisen out of inter-state competition of sales tax incentives.
Govt. of Gujarat is committed to create more employment opportunities with the purpose of involving unemployed youths i nadvantageous economic activities. Further, there is a good scope for the level of employment in small scale industries. Keeping this in view, with a view to attracting investment in small scale industries, an approach is adopted to give interest subsidy to industries which have taken loan or to give investment subsidy to industries which have invested their own capital. In order that the small scale industries are established throughout state and to make balanced development of small scale industries in the state, the state Govt. has decided to implement following scheme of providing incentives under New Industrial Policy – 2000.
2. Title
The scheme shall be known as “Interest subsidy or Investment subsidy to small scale industrial units scheme – 2000.”
3. Duration of Scheme
The scheme shall come into force from 15-11-2000.
(A) Industrial Undertaking
‘Industrial Undertaking’ means an undertaking producing or proposing to produce one or more articles in one or more factories, registered as a company under Companies Act, 1956, a partnership firm, a registered trust, a legally registered co-operative society or a firm of individual ownership. However an industrial undertaking owned or regulated by Central Govt. or State Govt. shall not be considered eligible for availing of incentives.
(B) Small Scale Industrial Unit
As currently decided by the Govt. of India, a small scale unit shall be defined as an industrial unit whose fixed capital investment in plant and machinery does not exceed Rs. 1 crore (acquired either in the form of ownership or by way of lease or higher purchase basis). Amendments that will be made if any, in the definition by Govt. of India, from time to time, shall be made applicable here also.
(C) New Small Scale Industrial Unit
‘New Small Scale Industrial Unit’ means a new unit established during the validity period of the scheme and registered as a small scale unit with the District Industrial Centre. If an entrepreneur of an existing unit establishes a new unit in that local area by taking separate registration number and no change in the production of a thing or article is proposed in the new project, it shall not be treated as expansion or diversification. Moreover, if an entrepreneur closes his existing unit and applies for benefit as a new unit by starting a unit under new name or by taking new registration number on the same site, he shall not be given the benefits under the scheme. However, if any existing unit registered as a small industrial undertaking, establishes a new unit in other local area, then it shall be considered as a new Small Industrial Unit. But the name of the new location is required to be added in the certificate of permanent small scale industry.
(D) Local Area
‘Local Area’ means an area prescribed as revenue boundary of the concerned Municipal Corporation, Municipality, Nagar Panchayat or Gram Panchayat.
(E) Expansion or Diversification
If an existing small scale industrial unit makes an addition of more than 50% in its existing fixed capital investment for any one of the following purposes, it shall be considered as expansion or diversification. (If however, due to such additional investment, a small scale industrial unit exceeds the investment limit of small scale industry, as prescribed from time to time, by Govt. of India, it shall not be considered eligible for the incentives under the scheme).
1. For the addition of existing installed capacity.
2. For starting production of additional new item(s).
3. Backward Integration of the production of the raw material for captive consumption.
4. Forward Integration for the production of new items using existing production.
(F) Modernisation
If an existing small scale unit makes an addition of 25% or more in its existing fixed investment for one or all of the following purposes, it shall be considered as modernization. (If however, due to such additional investment, a small scale industrial unit exceeds the investment limit of small scale industry, as prescribed from time to time, by Govt. of India, it shall not be considered eligible for the incentives under the scheme).
1. Adoption of new and improved production process, which results in energy saving, decreasing pollution and increasing production.
2. Making changes in the existing plant and machinery or adding modern plant and machinery in the production process for the adoption of new technology
3. Making changes in production process or existing plant and machinery or plant layout, for improvement of quality.
Note: On account of the change in the old plant and machinery or addition of modern plant and machinery of the unit, if the old machinery is required to be scrapped or put aside as of non-use, the amount equivalent to the value of such machinery shall be deducted from the investment considered for modernization. The benefits of the scheme shall however, not be extended for the replacement of the existing machinery.
(G) Existing Fixed Capital Investment
The existing fixed capital investment means the total fixed capital investment till the date from which the expansion or diversification is undertaken.
4. Eligible Fixed Capital Investment
Eligible fixed capital investment in case of self-financed units for the purpose of cash subsidy shall be considered as under:
The price of land means an amount actually paid for the land required for the new industrial project. It includes the amount spent legally for the acquisition/purchase/transfer.
New building means guest house, building required for the project on the site excluding the residential building of the Directors, office building, factory building and other buildings. The expenses certified by the Chartered Engineer for such constructions and the expenses actually incurred, whichever is less shall be considered. A building taken on lease or taken on rent shall not be considered eligible for fixed capital investment.
Other constructions consist of compound wall, internal roads, wells, bore- wells, water tanks, pipe lines, etc. Moreover, additional construction shall be taken into account, as will be approved by the District Level Subsidy Committee as per the requirements of the project.
Capital expenditure in regard to new plant and machinery and imported machinery (second hand), its electrification and installation expenditure. The expenditure on electrification shall be considered up to 10% of the cost of plant and machinery. However, if the industrial unit purchases its own transformer instead of the one provided by the Gujarat Electricity Board, the amount of this expenditure shall be considered as an additional amount.
Technical know how fees or drawing fee not exceeding Rs. 5 lakhs, paid to the foreign collaborators or foreign suppliers as approved by Govt. of India or to the laboratories approved by the State Govt. or Central Govt.
Diesel set/sets as per the power requirements of the project
Non-conventional energy equipments installed for meeting with the requirements of the project.
Instruments for purifying required water or removing salinity from the water or pollution control equipments.
Following investment shall not be considered for subsidy.
The date of commencement of commercial production means the date of bill of first sale. If, due to some circumstances no sale memo is issued, then the following will be scrutinized to decide as to whether production is started or not, for deciding the date of production.
1. Whether the unit has purchased and installed machinery required for production on prescribed date or not?
2. Whether the unit has obtained the power supply before the prescribed date or not?
3. Whether the unit has purchased all types of raw materials, consumables etc. or not?
4. Whether the unit has consumed industrial power during that month for the production or not?
6. Eligibility of Interest Subsidy and its Rate
The small scale industrial unit eligible for interest subsidy shall be offered subsidy, subject to the following terms and conditions
6.1 This interest subsidy shall be provided for the establishment of new unit or for modernization, expansion and diversification of existing unit.
6.2 The loan for the project should have been sanctioned by the financial institution recognized by Reserve Bank of India. This loan should have been obtained only for the establishment of new assets. The assets used earlier for production, shall be treated as second hand assets.
6.3 The loan should have been disbursed during the validity period of the scheme. The subsidy shall be given, subject to the Resolution (as amended) in force, on the date of sanction of loan to the unit.
6.4 The unit shall start commercial production during the period of the scheme or during the period prescribed by the Govt. form time to time.
6.5 Interest subsidy shall be given on the rate of interest as applicable to the term loan, as under:
a. 5% interest subsidy shall be given on total rate of interest imposed on term finance taken by the new small industrial unit or existing small industrial unit for its modernization.
b. 3% interest subsidy shall be given on total rate of interest as applicable on term loan taken by the existing small industrial unit for its expansion/diversification.
6.6 The criteria for the interest subsidy shall be as under:
a. Maximum limit of Rs. 5 lakhs per annum upto a total maximum limit of Rs. 25 lakhs for a new unit or existing unit for modernisation.
b. Maximum limit of Rs. 3 lakhs per annum upto a total maximum limit of Rs. 15 lakhs to small industries for expansion / diversification.
6.7 If any unit obtains finance from more than one bank or financial institution, the limits and provision of interest subsidy shall be applied to all such loans.
6.8 Interest subsidy shall be given for the period, the loan is fully repaid or five years whichever is earlier.
6.9 The period of interest subsidy shall be counted form the date of commencement of production. The interest subsidy however, shall be given for that portion of interest which the beneficiary unit makes timely payment to the bank, out of the total interest liability arising from the date of commencement of production.
6.10 The interest subsidy shall be admissible to a unit paying instalments and interest regularly. If any unit becomes defaulter for interim period (for more than three installments continuously), the benefit of interest subsidy shall not be extended for that period and such defaulting period shall be deducted from the eligibility of five years. The interest subsidy shall not be provided till such time, the default for the payment of loan continues.
6.11 The interest subsidy shall be available only on original interest. Penal interest and interest on interest shall not be considered.
6.12 The maximum limit of amount of interest subsidy shall not be changed, even if the maximum limit of Rs. 1 crore of investment in plant/machinery for small scale industry is changed in future.
6.13 The procedure for the disbursement of the interest subsidy shall be decided by the Industries Commissioner.
7. Scheme of Investment Subsidy
For the establishment of self-financed new unit, a cash subsidy at the rate of 10% of the eligible fixed capital investment up to a maximum limit of Rs. 10 lakhs shall be available. If the cost of the project of such units exceeds Rs. 50 lakhs, they have to get an appraisal report prepared by the Gujarat Industrial Technical Consultancy Organisation or Financial Institutions or private agencies recognized by them and submit the same. The amount of cash subsidy on eligible investment shall be paid in three equal annual instalments, after the commencement of the production.
Self Finance
The unit established with its own resources without any help of financial institutions and whose eligible investment is free from any type of financial burden, such investment is considered as self-financed investment.
8. Backward Areas
The rate of interest subsidy or cash subsidy shall be provided 25 % more than the rate prescribed above, in the backward areas declared by the state Government hereinafter. The maximum limit will also be raised correspondingly, up to another 25 %.
9. Industries entitled for subsidy
Tiny and small industries entitled for registration as per the definition given in Industries (Development and Regulation) Act, 1951, as modified from time to time. However, whenever the central Government or state Government may announce the list of banned industries from time to time, such industries shall not be entitled for the subsidy.
10 Procedure for the approval of interest subsidy
A small scale industrial unit entitled for interest subsidy under the scheme, shall have, after getting the sanction of loan from the financial institution,
to apply to the District Industries Center, along with a copy of the letter of sanction of loan, and to register itself for interest subsidy. Such a registered unit after commencement of production, has to make an application for the sanction of interest subsidy along with the letter of disbursement of loan.
11. Procedure for the approval of cash subsidy
Under the scheme , the small scale industrial unit, after having registered as a small scale industry, has to apply to District Industries Center in a prescribed application form and to get itself registered for cash subsidy. Such a registered unit, after commencement of production and completion of the project, shall have to apply to the concerned District Industries Center in a prescribed form for getting sanction of subsidy. After scrutinizing the application, the General Manager, of the District Industries Center, shall present the application before the District Level Cash Subsidy Committee for approval. The detailed procedure for approval and payment of interest subsidy and cash subsidy shall be prescribed by the Industries Commissioner.
12. Sanctioning Authority
(a) Interest Subsidy ( excluding modernization project)
General Manager, District Industries Center.
(b) The interest subsidy for modernization project shall be sanctioned by the State Level Committee. The committee will consist of the following members.
1. The Industries Commissioner– Chairman
2. Additional/Joint/Deputy Secretary, Industries and Mines Department - Member
3. Joint Secretary (FD) – Member
4. Representative of Gujarat Chamber of Commerce – Member
5. Chief Industrial Advisor – Member
6. Additional Commissioner of Industries – Member Secretary
(c) Cash – Subsidy
The cash-subsidy committee at the district level formed as follows, shall sanction the cash subsidy to entitled small scale industrial unit.
1. District Collector – Chairman
2. District Development Officer – Member
3. Representative of Gujarat State Financial Corporation – Member
4. Representative of District Level Industries Association – Member
5. General Manager, District Industries Center – Member Secretary
The Industrial Unit shall lodge the claim before District Industries Center for the payment of cash-subsidy. The unit shall submit the details of expenditure incurred on eligible assets which are acquired for getting cash subsidy along with documentary evidences.
13. Other Conditions.
The interest subsidy / cash subsidy sanctioned and disbursed under the scheme shall be subject to the following terms and conditions. In case of infringement of any of the conditions, the amount paid as subsidy shall be recovered as arrears of land revenue.
14. In case of interpretation, for any quarrel or dispute under the scheme, the final authority of decision shall remain with the state level committee. The decision of the committee shall be final and binding to the applicant unit applying under the scheme.