Industry Incentive Scheme 1999-2004 : Policies : Business

GOVERNMENT OF GUJARAT
INFORMATION TECHNOLOGY DIVISION,
GENERAL ADMIISTRATION DEPARTMENT
G.R NO: INP-1099-252-ITD
SACHIVALAYA, GANDHINAGAR.
Dated 9-3-99.

READ :

(1) G.R NO: ITP-1098-127-ITD OF G.A.D DATED 10-10-1998.
(2) G.R.NO: EMC-1098-156-ITD OF G.A.D DATED 14-12-1998.
(3) MINUTES OF EMPOWERED COMMITTEE

DATED: 30-1-1999.

1. Preamble

The Information Technology (IT) Policy of the state has acknowledged the potential of IT in transforming the society. The IT policy also emphasises the need to accelerate development of IT industry in the state of Gujarat. This in turn will help proliferate IT culture in the state and create large-scale employment opportunities.

During the last few years, IT has been the fastest growing segment of the economy. This sector has created enormous potential for export and growth. To give an impetus to this industry, it is imperative that, the incentive policy takes into account the typical characteristics of this industry.

Since, in IT industry, the investment in intangible assets tends to exceed tangible assets. The evolution of IT incentive policy has taken into account this factor as well.

2. Title

This scheme shall be known as Information Technology Industry - Incentive Scheme 1999-2004, hereinafter referred to as scheme.

3. Operative Period

This scheme shall become operative with effect from 01-04-99 and shall remain in force for a period of 5 years, from that date. However, a review of this scheme will be undertaken after two years, and based on the experience of State Government and the need of this sector, amendments to the scheme, if necessary, will be made.

4. Area Of Operation

It would be operative anywhere in the state of Gujarat.

5. Definition

a) " IT Software" means any representation of instruction, data, sound, image including source code, object code recorded in a machine, readable form and capable of being manipulated or providing interactivity to use by means of automatic data processing machine falling under head "IT Products".

b) "IT Service" is defined as any service which results from the use of any IT software over a system of IT products for realising value addition.

c) "IT Products" would include computer, digital-data communication and digital data broadcasting products as notified by the Ministry of Finance, Government of India or Central Board of Excise & Customs.

d) "IT Industry" would include development ,production and services related to IT products, IT Software and IT service. Appendix-I gives the list of IT industry heads.

e) The "Eligible New Information Technology Unit " means a new unit in IT industry set up after the cut-off date .It should also fulfil the following Criteria.

The new project should have obtained SSI registration from concerned District Industries Centre or obtained the Letter of Intent, Letter of Approval or obtained receipt against filling of Industrial Entrepreneur Memorandum.

The new project should have a separate identifiable capital investment means that, it should not have any linkage with an existing manufacturing/IT Industry unit.

f) Eligible IT Unit:

It is an existing IT Unit which registers itself as an IT Industry after the cut – off date. Such an unit should have commenced production before the cut off date.

g) Indian half Circuit- satellite communication link between two earth station via satellite (International segment) is divided into two parts, i.e. one earth station to satellite and the second part is

Satellite to other Earth station. The segment between the Indian earth station up to satellite is "Indian half Circuit" and satellite to other earth station overseas, anywhere in the world is the Second

Half Circuit.

h) Eligible Total Capital Investment

It includes:

1) Investment made in the land:
The actual cost of the land including the legal charges incurred for acquisition of land needed for the project. A plot of land acquired under lease agreement except from GIDC Estate / Infocity on rental basis will not be considered as Fixed Capital investment.

2) New building:
New building means building required for project including administrative building. The investment made in creating canteen, in-house training building for the staff of respective unit. The cost incurred on purchase of old building or repairing cost will not be made eligible for consideration as fixed capital investment. Residential accommodation for the employees of the unit, either constructed or bought would also be eligible. Old residential building will not be eligible.

3) Machinery:
This includes plant & Machinery needed to set up ‘Eligible New IT Unit’. This would also include ‘IT Product’ and ‘IT Software’.
IT Product and IT Software installed at the residence of the employees of the eligible new unit will also qualify subject to the limit of 5% of the Eligible total Capital investment.
The cost of electrification, transportation, erection, installation will be capitalised under the head - plant and machinery.
The investment made in acquiring air-conditioning plant/machine will also be eligible.
Transport facilities like bus/buses for the conveyance of the workers from the surrounding villages/towns to the factory and back.
Diesel generating sets of the capacity limited to the connected load.
Plant for non-conventional source of energy.
Cost of material handling equipment.
Plant for purification or de-salination of water.
Plant for pollution control measures.
Testing facilities.
The investment made in related furniture will be allowed upto 10%
of eligible fixed capital investment.

i) Assets Acquired:
The eligible fixed assets acquired and brought upto twelve months from the date of commencement of commercial production will be
eligible as "Eligible Total capital investment". No assets acquired, created and/or bought after the operative period of the scheme shall be considered eligible.
Assets acquired under DGP scheme/under hire purchase scheme or instalment system/lease scheme would be considered eligible, exclusive of cost of interest.

j) Ineligible Investment:
The following investment shall not be considered eligible for any incentives.
1) Working Capital
2) Commissioning fee
3) Goodwill fees
4) royalty
5) Preliminary and Pre-operative expenses.
6) Second-hand equipments purchased or reinstalled / shifted
7) Capitalised Interest
8) Any other investment which is not expressly narrated as eligible.
9) Technical know-how fee.

k) Eligible Turnover:
This is the turnover from "IT Product", "IT Software". It would be calculated on the basis of accounts submitted to the concerned Income tax authorities.

Explanation: Turnover from "IT Services " undertaken by the company will not qualify for consideration under the eligible turnover.

l) Eligible Incremental Turnover:
This is the difference between the eligible turnover of the current year and the eligible turnover of the previous year.

m) Cut-off Date: 01-04-1999.

6. Incentives:

The scheme offers incentives in the form of

7.Captial Investment Incentive:

1) Capital Incentive Subsidy:
Eligible new Information Technology unit will be entitled to avail capital subsidy @25% of eligible total capital investment or Rs.25 lakhs whichever is less.

2) Special Incentives:
There will be Special Incentives scheme for the projects with large capital base. Such provision is made in order to motivate IT industry to create industrial base with large turnover which in turn would generate large employment opportunities. These incentives will be in addition to the subsidy defined under capital investment subsidy as mentioned above.
The quantum of subsidy would depend upon investment made by the unit. The subsidy offered to such units will be as under

Eligible Total Capital Investment Subsidy (Rs/lakhs)
Rs. 50-100 Crore 25
Rs. 100-200 Crore 50 Above Rs. 200 Crore 100

b) Turnover Incentive:
IT Industry is characterised by high investment in manpower and low capital investment . Therefore, the capital incentive scheme does not form adequate incentive for the entrepreneur. Also, in order to motivate higher productivity the following is proposed:
An eligible IT unit and eligible New IT Unit would be entitled to a turnover incentive, to be given annually. In the first accounting year in which it becomes eligible the subsidy would be equal to 5% of the eligible turnover, and on the incremental eligible turnover subsequently. It would be limited to a ceiling of Rs.50 lakh per annum.
The turnover incentive would be admissible only during the operative period of the scheme.

c) Other Incentives:

1) Unit set up in Information Technology sector Services will be considered eligible to be exempted from power cuts.
2) Connectivity Incentive:
The IT policy of the state Govt. has recognised the importance of connectivity between the computing devices as extremely important to the growth of information technology in the state. In order to provide an IT industry link for the data transfer, it is proposed to provide subsidy on the leased lines obtained either from department of Telecom or from other authorised/licensed vendors. All eligible IT new units and eligible IT units would be entitled to connectivity subsidy for a sixty-four (64) kbps data line. In case a unit has higher capacity connection the subsidy would be limited upto 64 kbps only. It would be paid annually. The units could avail of either of the two formats as given below :--

An eligible IT unit/eligible new IT unit would be entitled to a subsidy of 50% of the lease rental that it pays for its data line. It would be admissible annually for three years or operative period of the scheme whichever is earlier. This would be only be admissible for capacity upto 64kbps.. A unit would receive subsidy on actual annual lease rental paid upto a maximum line length of 500 kms. or the nearest available international gateway which ever is less.
b) For those units availing of point to point connectivity through a satellite earth station the unit would be entitled to 50 % of the lease rental of the "Indian Half Circuit". It would be admissible annually for three years or operative period of the scheme, whichever is early.
Any fixed costs paid in the process of installing these lines in either of the formats will not be admissible for the connectivity incentive.
An Internet Service Provider or a cyber café or an eligible IT/ new IT unit which is in the business of providing internet connection/ services to others will not be eligible for this incentive.

3) A unit set up for providing/manufacturing IT service and software will not be required to obtain NOC from Gujarat Pollution Control Board

7. Procedure:

1) This Incentive scheme will be operated through Commissioner of Information Technology.

2) The units will be granted Incentives by the State Level Committee framed by Government of Gujarat. The State Level Committee will consist of following members:

1. Additional Chief Secretary (ART & IT) Chairman

2. Secretary (Economic Affairs) Member

3. Industries Commissioner. Member

4. Vice-Chairman & Managing Director, GIDC. Member

5. Managing Director, GIIC. Member

6 Managing Director, GSFC. Member.

7. Commissioner, I.T. Member Secretary

3) The unit which propose to engage in IT sector and desires of availing these incentives will have to register with the Commissioner of Information Technology after obtaining legal possession of land with valid non-agriculture use permission for Industrial use as prescribed by Revenue Department and Registration/Letter of Intent/Letter of Approval or obtained receipt against filing of IEM to the appropriate authority.

An eligible IT Unit , in order to avail of the turnover incentive and connectivity incentive will have to register itself with the Commissioner Of IT as per the procedure laid down by it.

8.Sanction:

1) The capital subsidy would be admissible after the unit commences production and produces a certificate to that effect from Chartered accountant on the Panel of Information Technology Commissioner. This will be subject to verification by Commissioner of IT.

However, the unit shall have to submit the claim for sanction of incentives to the Commissioner of Information Technology within six months from the date of commencement of commercial production. The application submitted thereafter will not be entertained.

2) In case of Turnover subsidy it will be paid only on the basis of records submitted by the IT unit to the income tax department and verification process as laid by Commissioner of IT from time to time.

3) The connectivity incentive will be paid at the end of the financial year in which the leased line has been utilised on the basis of actual billing and verification by IT commissioner.

4)The verification procedure that would lead to sanction of a incentive/subsidy would be prescribed by the commissioner of Information Technology.

9.Other Conditions:

The Incentives granted under the scheme will be subject to following condition and in breach of one or more than any these conditions will make the unit defaulter and the incentive/subsidies are liable to be recovered as arrears of land, revenue.

1) The IT Unit shall have to remain in production continuously at least till the expiry of eligible period of incentive. However, in case the production is dis-continued due to reasons beyond the control of the management of the unit State Level Committee meeting may consider the representation in individual case and condone the party of discontinuation of production.

2) All matters of interpretation/dispute or contention will be referred to the state level committee whose decision will be final and binding on the eligible new IT unit/ eligible IT unit.

3) A eligible new IT unit will not be permitted for simultaneous registration with Capital Incentive Scheme 1995-2000 operated vide Govt. Of Gujarat Resolution, in Industries & Mines Dept., No. INC/1095/2000(4)/1 DT.11/9/1995. An Eligible IT unit which mighthave taken benefit under the capital Investment Incentive Scheme will have to discontinue availing further benefits under it in order to be eligible to claim incentives under the scheme.

The IT industrial unit shall furnish details regarding production employment or any other information which should State Government may require from it from time to time.

This issues with the concurrence of Finance Department dated 2/3/99 on this Department’s file No:INP-1099-252-ITD.

By order and in the name of the Governor of Gujarat,

Atanu Chakraborty

Joint Secretary (IT)

General Administration Department

To ,

The Secretary to the Governor, Raj Bhavan,Gandhinagar.

The Principal secretary to the Chief Minister.

The Advisor to C.M.( S & T)

The Advisor to C.M. (E.A.)

The Personal Secretaries to all Ministers

The Personal Secretary to the Leader of Opposition Party in Gujarat Legislative Assembly,gandhinagar.

All Secretariat Departments.

The Secretary,Gujarat Vigilance Commission, Gandhinagar.

The Secretary, Gujarat Public Service Commission,Ahmedabad.

The Secreatary, Gujarat Legislature Secretariat, gandhinagar.

The Registrar,Gujarat High Court,Ahmedabad.

The Secretary,Gujarat Civil Services Tribunal,Gandhinagar.

All Heads of Department

All Heads of Offices

All Collectors

All D.D.Os

The Accountant General,(A.& E.) Gujarat,Post Box No.220,Rajkot.

The Accountant General (A.& E.) Gujarat,Ahmedabad Branch,Ahmedabad.

The Accountant general (Audit)-1,Gujarat,M.S.Bldg.Ahmedabad.

The Director of Accounts & Treasuries,Ahmedabad

All Treasury Officers

All Pay & Account Officers Ahmedabad / Gandhinagar.

Resident Audit Officer , Ahmedabad /Gandhinagar

All Branches in General Administration Department, Sachivalaya, Gandhinagar

Select File I.T. division / G.A.D.

APPENDIX-1

CATEGORIES OF INDUSTRIES INCLUDED IN THE SCOPE OF

INFORMATION TECHNOLOGY INDUSTRY