The Government has launched “North East Industrial Development Scheme” for industrial units to promote sustainable industrializations and employment generation in North East regions states including Sikkim. Under this scheme, the Government grants a package of fiscal incentives to eligible industrial units engaged in the manufacturing and service sectors to accelerate economic growth and boost in the process of industrialization in the North-Eastern Region of India. For enhancing employment in the North East regions, the Government is incentivizing primarily the MSME units through this scheme. Also the Government is providing specific incentive amount through the scheme to generate employment.
The Scheme will be effective from the date 01.04.2017 and will remain in force up to 31.03.2022.
• All new industrial sectors under the manufacturing and services sector including Biotechnology and also Hydel Power Generation Unit sectors that are up to 10 MW located in the North East Regions (NER), will be eligible for the incentives under this NEIDS scheme.
• Total benefit from all components of scheme shall be limited to total investment in Plant and machinery subject to maximum limit of 200 crore per unit
• All such industries/units are needed to be mandatorily be registered with the Department.
• All eligible industrial units will be allowed to get the benefits under one or more components under this scheme, even if such units are getting benefits under other schemes of the Government of India.
• Plant & Machinery for the service sector industrial unit would include the cost of construction of a building and all other permanent physical assets basic to the running of that specific service industry but exclude the total cost of land and consumables, disposables or any other item charged to revenue.
• Only new industrial units are eligible to avail the benefits under the scheme. This scheme would not be applicable to the industries that are:
o Established by the splitting up or reorganizing an existing business
o Created by the transfer to the new unit of plant and machinery previously used for any other purpose; and
o Relocated from elsewhere and/or existing units reopened under a new name, brand, etc.
Incentives under the Scheme
Under the Scheme, the following incentives will be provided to the eligible new industrial sectors set up in the North-Eastern (NE) States (including Sikkim) on reimbursement basis:
| No. | Incentive Type | Incentive Amount |
|---|---|---|
| 1. | Central Capital Investment Incentive for the Access to Credit (CCIIAC) | The investment in Plant & Machinery of about 30% subject to limit of INR 5 Crores on the incentive amount per unit. |
| 2. | Central Interest Incentive (CII) | Interest incentive @ 3% on working capital credit advanced by the Scheduled Banks or Central/State financial institutions for first 5 years from the date of commencement of commercial production by the unit. |
| 3. | Central Comprehensive Insurance Incentive (CCII) | 100% Reimbursement of insurance premium on the insurance of Plant & Machinery and building for the period of 5 years from the date of commencement of commercial production by the unit. |
| 4. | Goods and Service Tax (GST) Reimbursement | The reimbursement that will be up to the extent of Central Government share of CGST and IGST for the period of 5 Years from the date of commencement of commercial production by the unit. |
| 5. | Income Tax (IT) Reimbursement | Centre’s share Reimbursement of income tax for the period of first 5 years including the year of commencement of commercial production by the sector. |
| 6. | Transport Incentive (TI) | The cost of transportation of up to 20% including the subsidy currently provided by the Railways or Railway PSU for the movement of finished goods by rail. The cost of transportation of 20% for finished goods for the movement through Inland Waterways Authority of India. The cost of transportation of about 33% of air freight on the perishable goods (as defined by IATA) from the airport nearest to the place of production to any airport within the country. |
| 7. | Employment Incentive (EI) | The Government would grant 3.67% of the employer’s contribution to the Employees’ Provident Fund (EPF) |
The following are the rules for claiming various incentives under the North East Industrial Development Scheme (NEIDS):
The project cost will need to be appraised by Scheduled Commercial Bank or Financial Institutions before proposals of assistance is approved by the empowered committee of DIPP. The specific absolute amount of total assistance shall be indicated in government sanction. 10% of the government assistance will be allowed to be used for project financing in the beginning and balance 90% will be kept in an escrow account. Full assistance will be released on the basis of Certificate issued by competent authority of the bank that capex on the project report and sanction thereof is in place and Plant and machinery has been put to use.
The applicant has to submit a certificate with a recommendation statement/letter from a scheduled bank, or central or state financial institution, clearly indicating the credit limit that is granted by the bank with respect to the below following:
• Working capital requirement for the claim period
• Actual drawdown by the unit against the credit limit
• The total interest charged by the bank on the working capital utilization
• Interest rate charged by the bank
• The marginal value of fund-based lending rates of the lending institution
• A claim must be submitted for a full financial year within 6 months after the end of that year
For the purpose of the scheme, the working capital requirement of the unit shall be capped at 25%of their maximum turnover.
The claim for CCII must include all the details of buildings, plant and machinery insured have to be given in support of a claim for a complete financial year within 6 months after the end of that year.
The reimbursement on finished goods applies only to the central share of the net GST that has been paid and the rules that specify the method of calculating the refund amount. A claim must be made within 6 months after the end of the relevant quarter and the process for the approval of claims is similar to that adopted by the Central Board of Indirect Taxes and Customs for the GST reimbursement under other schemes;
The claimant has to provide a copy of the “intimation” that is issued under section 143(1) of Income Tax Act 1961 (ITA) and also confirmation of the amount of the claim. (The intimation is the preliminary assessment issued by the Centralized Processing Center of the Central Board of Direct Taxes (CBDT) after it has processed the taxpayer’s return and checked for any arithmetical inconsistencies, potentially incorrect claims, etc.) The claim should be filed online within 6 months from the end of the month that the intimation was issued. The reimbursement of income tax will be approved by the DPIIT in consultation with the CBDT.
The claims have to be submitted quarterly within 6 months of the end of the relevant quarter.