Incentive Scheme 2001 for Economic
Development of Kutch District

TRANSLATED VERSION
Government of Gujarat
Industries and Mines Department
Resolution No.INC-10200-903-I,
5 Sardar Bhavan, 4th Floor,
Sachivalaya, Gandhinagar
Date: 9-11-2001

The economic activities in the district of Kutch came to a standstill on account of the devastating earthquake in the State on 26th January, 2001. New employment opportunities could be created if new investment takes place. The Government is committed to attracting industries in the district to make the industrial and economic environment live. Government of India have announced excise duty exemption for new industries to promote large scale investment in the district, along with which the State Government has also decided to announce the scheme of sales tax incentives. Since the scheme is aimed at making the economic environment of Kutch district live, it has been decided to confine the same only to Kutch district.

1. Title
This scheme shall be known as Incentive Scheme 2001 for Economic Development of Kutch District.

2. Operative Period of the Scheme
This scheme shall come in force from 31.7.2001 and shall remain in force till 31.10.2004.

3. Definitions

3.1 Industrial Undertaking
An industrial undertaking means one or more factories in which one or more items are either produced or going to be produced and is registered as a company under the Companies Act, 1956, as a partnership firm, registered trust or legally registered co-operative society or an organization existing as a proprietorship firm. However, the industrial undertaking under the control of and/or owned by Central Government or State Government shall not be eligible for incentives under the scheme other than what is provided in the banned list (Annexure-C).
(Incorporating amendments made vide Corrigendum No.INC-102000-903-I dated 12/11/2001)

3.2.1 New Industrial Unit
New industrial unit means a unit established in the district of Kutch by any industrial undertaking during the operative period of this scheme. This unit shall have to fulfill the following conditions for being qualified as a new industrial project.
(a) For new project, a separate licence or registration shall have to be obtained or necessary amendments should have carried out in the existing licence or registration. (b) For the new project, separate identifiable investment shall have to be made and it should not be a part of existing project or expansion thereof. For new scheme, it is necessary to have a separate building and the accounts should also be maintained separately. However, the new project using the utilities such as water, power, steam and pollution control facilities from the existing units shall not loose the eligibility to receive the incentives under the scheme.
Explanation: In the case of any controversy with regard to whether a particular unit is considered to be new or not, a State Level Committee shall decide and the decision of this committee shall be final and binding on the industrial undertaking.

3.3 Commercial Production
The date of commercial production means the date of first sale bill.

3.4 Project Cost
Project cost means total investment involved in the project excluding the margin for working capital.

3.5 Industrial Complex
Industrial complex means a group of separate projects established at one location for the production of one or more items.

3.6 Eligible Fixed Capital Investment
The definition of eligible fixed capital investment shall be considered as under:

3.6(a) Land : 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.
3.6(b) New Building : New building means building required for the project on the site such as factory building, office building, store building, etc. except the guest house or the building for the residence of owner-director. The expenditure incurred for the building used for installation of plant and machinery will be considered on actual basis. In case of other buildings, the value will be considered as per the norms laid down by the state level committee or the actual expenditure incurred whichever is less. Buildings taken on lease or rental basis will not be considered eligible for fixed capital investment (except GIDC). The expenditure incurred for the purchase or repairing of old buildings will not be considered as a part of fixed capital expenditure.
3.6(c) Other Constructions : Other constructions consist of compound wall, internal roads, wells, borewells, water tanks (all types of pipe lines carrying water, gas, liquid from its original source to the factory) , etc. Moreover, as per the requirements of the project, expenditure on other construction will also be taken into account as approved by the State Level Committee.
3.6(d) Plant and Machinery : Expenditure incurred in regard to new plant and machinery and imported machinery (second hand), utilities, other required equipments for plant, dyes, moulds etc. and electrification, transportation, installation, foundation expenditure etc. will be considered as capital expenditure under the head of plant and machinery. Industrial units incurring expenditure on the purchase of transformer as a part of electrification will also be permitted to be considered as capital investment. The expenditure incurred for installation of facilities for purification of water or desalination including equipments for pollution control, material handling equipments used in the factory, power generating plant for captive use with the installed capacity equivalent to the expenditure of connected load or 25 MW whichever is less and the nearest generation capacity of the available generating set will be considered. In such cases where more generating capacity than this installed capacity is established, the eligibility of capital investment will be considered in proportion of total installed capacity and connected load.
3.6(e) Technical Know-how and Engineering, Drawing Design Fee : Technical know-how fees or drawing fees not exceeding 5% of the investment in plant and machinery 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.

3.7 Capital Investment in Project related Infrastructure Facilities
Investment made in the following project related infrastructure facilities will be considered as fixed capital investment. However, the direct expenditure (except other capital expenditure) incurred will be considered eligible for incentives.

For the purpose of eligibility, expenditure on above referred project-related infrastructure will be eligible for incentives, limited to 20% of the quantum admissible to the unit, in terms of eligible fixed capital investment.

3.8 The expenditure incurred by small scale units will be considered eligible for the purpose of incentives upto a period of six months from the date of commencement of production or completion of the project - whichever is earlier. In case of medium and large scale units, the expenditure incurred within a period of one year from the date of commencement of production or completion of the project - whichever is earlier shall be considered eligible for the purpose of incentives. In the case of industrial unit having project cost exceeding Rs.10 crore the expenditure incurred within a period of 18 months from the date of commencement of production or completion of the project - whichever is earlier shall be considered eligible for the purpose of incentives.
Explanation: The plant and machinery purchased under the scheme of DPG or hire purchase shall be considered eligible for incentives. However, the amount of interest incurred for acquisition of such assets shall not be considered eligible. The industrial unit shall have to give a legal undertaking that the assets purchased under the scheme of DPG or hire purchase shall not be surrendered to the original owner during the eligibility period of the scheme. However, if having done so, the eligibility of sales tax incentives shall be cancelled and the incentives availed (exemption-deferment) shall have to be refunded within a period of one month from the date of breach of contract for purchase under the scheme of DPG, hire purchase or installments with a penal interest of 24%.

3.9 Ineligible Capital Investment
Following investment shall not be considered as eligible fixed capital investment for the purpose of incentives.

  1. Working capital
  2. Goodwill fee
  3. Commissioning fee
  4. Royalty
  5. Pre-operative expenses
  6. Second hand plant and machinery purchased or shifted from within the country
  7. Interest transferred to capital account
  8. Trucks, motor car, van trailors, tractor and other transport equipments for handling of goods
  9. All capital investments not indicated as eligible capital investment explicitly.

3.10 Eligible Area
Kutch District

3.11 Eligible Industries and in-eligible industries
1. All eligible industrial units registered under the policy of Govt. of India for small scale industry in force from time to time.
2. All the industries falling under the First Schedule of IDR Act, 1951 (as amended from time to time).
3. Shall be interpreted as per the definitions of tiny, SSI units, medium and large industry as accepted from time to time by Govt. of India and State Govt.
The industries which are not eligible to receive the benefit of excise exemption under the Excise Exemption Notification dated 31/7/2001 issued by Central Govt. (as per Annexure-A) will not be considered as eligible industry for benefits under this scheme. However, of these the industries enlisted under Annexure-B of this Resolution will get the benefit of this scheme. In addition, the industries which are covered under Annexure-C of this Resolution will not be considered eligible for benefits under this scheme.

4. Sales Tax Incentives

4.1 Eligible units will be able to avail of the benefits of sales tax exemption or sales tax deferment on their eligible fixed capital investment. Under the sales tax incentives, the tax to be recovered against the sales proceeds under the Gujarat Sales Tax Act or Central Sales Tax Act shall be considered. The units shall have to opt for one of the following incentives.

(a) Sales Tax Exemption
(b) Sales Tax Deferment
(c) Composite scheme for units having capital investment exceeding Rs.100      crore.

4.2 Sales Tax Exemption
Under the sales tax exemption scheme, the eligible unit will be entitled to purchase the raw materials, packing materials and all the processing materials utilized for the purpose of manufacturing goods, without the payment of sales tax. In addition, it will be exempt from the payment of sales tax in respect of sale of finished goods, intermediates, by-products, waste and scrap produced by it. The industries opting for the scheme of sales tax exemption will be eligible to receive benefits as per the input/output norms prescribed under the Exim Policy of Central Government for sales tax exemption at various stages of the purchase of materials. For the purpose, the unit shall have to submit a certificate from Chartered Accountant. Such certificate shall include the details of the sale of finished goods based on the purchase and utilization of input material. One copy of this certificate will have to be submitted to Sales Tax Commissioner. The norms for the items which are not covered under the Exim Policy, shall be prescribed by the Industries Commissioner and the same will be informed to the Sales Tax Commissioner.

4.3 Sales Tax Deferment
Unit opting for sales tax deferment will have to pay the amount of sales tax to the Government on the finished good(s), intermediates, by-products, waste and scrap manufactured by it after the prescribed period of time. The amount so payable will be recovered in six equal annual installments by the Sales Tax Dept. beginning from the financial year subsequent to the year in which the unit exhausts its limit of incentives under the scheme or the expiry of relevant period or time limit during which deferment is available, whichever is earlier. The benefit of sales tax deferment will be available only for the sales tax and the units which have opted for sales tax deferment will not be entitled to the benefits at the stage of purchase of materials. No interest shall be charged on the payment of amount of sales tax deferred for a prescribed period.

4.4 Option
While applying for the scheme, the unit will have to submit its option before the approving authority indicating option for sales tax exemption or sales tax deferment. However, if the unit would be permitted to change the option subsequently once before the issuance of the eligibility certificate by the Sales Tax Department. No unit shall be eligible for sales tax incentives without getting registered with the Industries Commissioner under the scheme and shall not be entitled to the sales tax incentives.

4.5 Composite Scheme
The units with capital investment exceeding Rs.100 crore will be entitled to the benefit of both the schemes - sales tax exemption and sales tax deferment. Under the scheme, the eligible unit for the purpose of manufacturing products will be entitled to purchase of raw materials, consumables, packing materials, processing materials, free of tax. Finished goods, intermediate products including by-products, scrap, waste material produced by the unit will be eligible to receive benefits of sales tax exemption and sales tax deferment. For the purpose, the unit while applying to the Industries Commissioner will have to submit details of the amount of sales tax exemption and sales tax deferment and the time limit thereof. No change shall be permitted thereafter.

4.6 Quantum of Incentives
1. At the rate of 100% for a period of five years from the date of commencement of commercial production for the eligible fixed capital investment upto Rs.10 crore.
2. At the rate of 100% for a period of seven years from the date of commencement of commercial production for the eligible fixed capital investment exceeding Rs.10 crore but upto Rs.50 crore.
3. At the rate of 100% for a period of ten years from the date of commencement of commercial production for the eligible fixed capital investment exceeding Rs.50 crore.

4.7 Change in Production of Item
During the currency of the period of the incentives, no change shall be permitted in the production of articles registered or permitted, without the written prior permission of the approving authority who had granted the eligibility. For making proposed changes, application for written permission will have to be made before three months. The benefit of incentives on account of such changes in the manufacture of new articles shall be permitted after the date of commencement of production of new items or insertion of new item from competent authority granting eligibility certificate whichever is later. The investment made for such additional item(s) or for change in finished products shall not be considered eligible for incentives. Such changes or amendments will have to be in accordance with the conditions indicated in the original sales tax eligibility certificate.

5. Effective Steps for Pipeline Units
The industrial units having taken following effective steps by 31-10-2004 and not having been able to commence commercial production by 31-10-2004 shall be permitted to avail of the benefits as pipeline cases under the scheme, provided that they shall undertake to go into production by 31-10-2005.
1. Small scale industry or medium and large industry for the purpose of registration should have submitted the application by 31-10-2004.
2. Application for availing of the finance from the financial institution or bank should have been made before 31-10-2004.
3. Should have acquired land or should have received the offer of land from GIDC before 31-10-2004. 4. Should have made 50% of the investment of the project cost before 31-10-2004.

6.1 Competent Committees to grant incentives

6.1.1 State Level Committee (Committee for Medium and Large Industries)
1.Principal Secretary (Industries & Mines Dept.) - Chairman
2.Principal Secretary/Secretary (Economic Affairs), Finance Dept. - Member
3.Industries Commissioner - Member
4.Sales Tax Commissioner - Member
5.Chief Industrial Advisor - Member
6.President, Gujarat Chamber of Commerce - Member
7.Additional Industries Commissioner - Member Secretary

6.1.2 District Level Committee (Committee for SSI)
1.District Collector - Chairman
2.Regional Manager, GSFC - Member
3.Lead Bank Manager - Member
4.Concerned Asst. Sales Tax Commissioner - Member
5.General Manager, District Industries Center - Member Secretary

7.0 Procedure
(a) In order to avail of the incentives the unit will have to apply in the prescribed format and obtain registration from District Industries Center/Industries Commissioner before going into production. On the basis of this registration, unit will be able to avail of sales tax incentives for 120 days.
(b) After commencement of commercial production, the unit will have to apply in the prescribed format within a period of 120 days from the date of commencement or production. Along with the application, details of fixed capital assets installed up to the date of commencement of commercial production will have to be furnished.
(c) In the case of the unit applying later than 120 days from the date of commencement of commercial production, such period will be considered as the period of delay and the amount of eligible incentives will be reduced in proportion and the eligibility period will be reduced to the extent of delay. However, the units will have the option to avail of the benefit either from the date of commencement of commercial production or from the date of application.
(d) If the project of the unit is not completed, the Industries Commissioner/ General Manager, District Industries center shall issue provisional eligibility upto 25% of the eligible amount after considering installation of fixed assets.
(e) On completion of the project, the industrial unit shall have to furnish all the details to Industries Commissioner/General Manager, District Industries center. The fixed assets will be inspected at the location.

8. Other Conditions
Under this scheme, following conditions shall be applicable to sales tax incentives. In the case of violation of one or more conditions, the amount of sales tax incentives availed of shall be recovered as arrears of land revenue.
(a) The industrial unit shall have to give a clear undertaking that it shall not transfer or dispose of the assets in any manner, till the expiry of the eligibility period of incentives.
(b) The industrial unit availing of the incentives under the scheme, shall have to install, effectively use and maintain the pollution control equipments as per the standards prescribed and approved by the competent authority.
(c) The industrial unit shall have to continue production upto the period of eligibility. However, if the unit does not remain in continuous production on account of the reasons beyond the control of the management, the unit shall present its case before the State Level Committee as an individual case on which the committee can take decision to waive the period of discontinuation of production based on the representation made.
(d) The industrial unit shall have to furnish the details of production, employment and other information every year before 30th June or from time to time as sought by the State Government.
(e) As per the employment policy of the Government of Gujarat, the unit availing of the incentives, will have to recruit local persons for a minimum of 85% of the total posts and for a minimum of 60% of the managerial and supervisory posts. The unit shall have to submit the details of fulfilling the conditions of local employment to the concerned authority granting the incentives to his satisfaction. The percentage of the above mentioned employment will have to be maintained by the industrial unit during the eligibility period of the incentives. Otherwise, the amount of incentives availed by the unit can be recovered as arrears of land revenue.
(f) Unit will have to invest the amount equivalent to 50% of the sales tax incentives availed in the new projects in the state within a period of 10 years from the date of commencement of commercial production.
(g) Unit opting for sales tax deferment scheme for the purpose of deferred amount shall have to give a personal undertaking in the form of security bond as prescribed vide Resolution No.INC-1087-2138-I dated the 1st August, 1990 or equitable charge, second charge.
(h) The unit availing of incentives under any other scheme of the State Government will not be eligible to receive benefits under this scheme.
(i) Expansion, diversification or modernization of the existing industries will not be considered eligible for the benefits under this scheme.

9. The State Level Committee will resolve the issues of interpretation, dispute or quarrel under the scheme.

This issues with the concurrence of the Finance Department given on 8-11-2001 on the file of even number.

In the name and by order of Governor of Gujarat

Shobhana Desai
Deputy Secretary
Industries and Mines Department

(This is the English translation of Government Resolution No.INC-10200-903-I dated 9-11-2001 which was originally issued in Gujarati. No legal liabilities therefore, will arise out of any mistake or error of interpretation from this version. In case of any dispute regarding any interpretation, the provision (s) made in the original Gujarati version of the above mentioned GR shall be treated as final and binding.)

ANNEXURE-A

ANNEXURE ATTACHED TO CENTRAL GOVERNMENT NOTIFICATION NO.39/2001
CENTRAL EXCISE DATED 31-7-2001

1. Goods falling under Chapter 24 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986):
2. The following goods, falling under the said First Schedule to the Central Excise Tariff Act, 1985, namely:-

(a) Candles;
(b) Footwear of a retail sale price not exceeding Rs.125 per pair;
(c) Tableware and Kitchenware of glass;
(d) Imitation jewellery;
(e) Monochrome television receivers;
(f) Vacuum and gas filled bulbs of retail sale price not exceeding Rs.20 per bulb;
(g) Sunglasses for correcting vision;
(h) Watches and clocks of retail sale price not exceeding Rs.500 per piece;.
(i) Rubberised coir mattresses;
(j) Toothbrushes;
(k) Kerosene, that is to say, any hydrocarbon oil (excluding mineral colza oil and white spirit) which has a smoke content of 18 mm or more [determined in the apparatus known as smoke point lamp in the manner included in the Bureau of Indian Standards Specification ISI: 1448 (P.31)-1968 as in force for the time being] and is ordinarily used as an illuminant in oil burning lamps;
(l) Liquefied petroleum gases and other gaseous hydrocarbons other than natural gas, ethylene, propylene, butylenes and butadiene;
(m) Compressed Natural Gas (CNG);
(n) Cotton sewing thread, not containing synthetic staple fibres;
(o) Cotton yarn, not containing synthetic staple fibres;
(p) Diesel engines upto 10 HP; and
(q) Goods specified in the Table annexed to notification No.11/2001- Central Excise dated the 1st of March, 2001.

3. Goods specified in the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986).

ANNEXURE-B

Following items in which Excise Exemption is not available in Kutch district are eligible for Sales Tax Incentive Scheme of the State Government.

1. Candles;
2. Footwear (MRP not exceeding Rs.125/- per pair)
3. Tableware
4. Imitation Jewellery
5. Vacuum and gas filled bulbs (MRP not exceeding Rs.20/- per piece)
6. Sunglasses for correcting vision
7. Rubberised coir mattresses
8. Toothbrushes
9. Fabrics of carded or combed wool or carded or combed fine animal hair
10. Cotton fabrics woven or handlooms
11. Lemonades preparation or other beverages other than aerated drinks
12. White Cement
13. Alumininous cement (Cement fondu)
14. High alumina refractory cement
15. Beauty or make-up preparations
16. Pre-shave, shaving or after shave preparations
17. Personal deodorants and anti-perspirants
18. Solid or cushion tyres, interchangeable tyre treads and tyre flaps of rubber
19. Motor vehicles principally designed for transport of more than six persons, but not exceeding 12 persons, excluding driver, including Station Wagons.
20. Travel sets for personal toilet, sewing or shoe or clothes cleaning.

ANNEXURE-C

LIST OF BANNED INDUSTRIES

1. Producing of firewood and charcoal.
2. Decorticating expelling, roasting, parching, frying of edible oil seeds, viz. groundnut/sisham, rapeseed, Mustard, Sunflower, Soyabeen, Seflower, Kardi, Nizar, Parlmoil, Coconut, cottonseed etc. and refining, colouring/decolouring and scanting of oil (except in Co-operative sector and oil Ghani).
3. Solvent extraction of oil from edible seed/edible oil cake processing and/or hydrogenation or edible oil (except in co-operative sector).
4. Thinner and French Polish, Kakab and Gadaku.
5. Dairy milk powder and other manufacturing products starting from milk (except in co-operative sector). However, mere pasteurization and sterilization of milk will not be eligible.
6. Mining
7. Electricity Generation (except captive electricity generation).
8. Cottage and village industries falling within the purview of Khadi and Village Industries Board, Khadi and Village Industries Commission and industries falling within the purview of coir/silk handloom handicrafts board and units set up by self-employed workers and artisans etc. which are covered under separate scheme of assistance.
9. State and Central Public Sector undertaking (except in case the following conditions are fulfilled).
(a) In case items of manufacture is in competition with private or public sector units.
(b) In case public sector undertaking gives an undertaking to invest the amount eligible under the incentive package in backward areas of State.
(c) Item of manufacture is not based on local minerals resources for which permit or licence is required under any mineral rules or Act.
10. Such other items for which registration is not to do or registration is to be restricted as per the advice of the Development Commissioner (SSI), New Delhi or from DGTD or Letter of Intent under IDR Act is not granted.


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