PACKAGE OF INCENTIVES AND CONCESSIONS FOR' NEW INDUSTRIAL INVESTMEN-TS IN KARNA TAKA 1990-'95

1.0 INTRODUCTION

Government of Karnataka is committed to a policy of rapid industrialization in all parts of the State. With a view to attract new industrial investments in the State, especially to the backward areas, the Government and other developmental agencies are offering several incentives and concessions. A package of. incentives and concessions for new industries was introduced - vide Govt. Order No. CI/121/SPC/82 dated 30.10.1982 with effect from 1 s1 November 1982 and it was in force for five years upto 31.10.1987. This package however has been continued till 31st March 1988 with certain modifications.

A new package of incentives and concessions has been announced - vide Got, Order No, CI/146/ SPC/88 dated 5.12.1988 by Govt. of Karnataka and to same was to have been in effect for a period of 5 years from 1.4.1988.

Meanwhile the Government examined the impact of the Industrial Policy resolution of 1983 and have decided to re-orient the State's Industrial Policy with a view to achieve accelerated industrial development in all sectors namely Tiny, Small, Medium & Large Scale Industries in the State, Separate orders have been issued for the new Industrial Policy, While highlighting the strategy and approach for development of industries in future years the Industrial Policy has also stated that '1he package of incentives and concessions for industrial development will be restructured suitably to ensure that the entrepreneur of the State is not placed in a disadvantageous position and backward areas of the State will also be reclassified suitably to remove the existing anomalies",

Accordingly, a  need was felt to restructure the incentives and concessions offered particularly in view of the fact that the incentives and concessions offered by the State were not available to the existing industries for expansion, diversification and modernization and also the incentives offered by the State were not, in some respects, comparable to those offered by other States.

Government, therefore, have concluded that any revision of the package of incentives and concessions should have the following objectives, namely:

a)A special thrust for industries in the KVI sector as also artisan based industries which serve the twin objectives of employment generation and rural industrialisation;

b)A homogeneous and balanced growth of industries in all sectors viz" Tiny, Small, Medium & Large Scale;

c)Dispersal of industries to backward areas and providing inducements to industries to move away from the areas of high concentration and invest in identified backward areas having necessary potential for industrial development;

d)Special incentives to entrepreneurs belonging to SC/ST, Women, Physically handicapped. Exservicemen and' Minority community;

e)Special concessions for industries in thrust sectors which have large employment potential, potential for utilising resources available within the State & assist in conservation of energy and pollution control;

and

f)Creation of employment opportunities to the locaI people.

Keeping all the above objectives in view, Government have sanctioned the revised package of Incentives & concessions for new industrial investments in the State - vide G.O. No. CI:/138/ SPC/90 (P), Bengaluru, dated 27th September 1990.

The salient features of this package are explained in the following paragraphs and it is urged that the entrepreneurs will take advantage of these incentives and concessions and start new industries benefiting themselves and to the society. 

2.0 SALIENT FEATURES:

2.1 Zone-wise Classification of State;.

For the purpose of applicability of this' package the State shall be divided into four zones as detailed in Annexure I.

Zone I : covering 2 Talukas

Zone II . covering 38 Talukas Zone III: covering 129 Talukas

Zone IV: covering 6 Talukas and three growth centres to be set up at Dharwad, Hassan and Raichur.

2.2 Investment Subsidy:

Investment subsidy shall be available to new industrial investments (including for expansion, modernisation and diversification) in Zones II, III and IV as per details given below:

Zone I                  Nil

Zone II                 15% of the value of fixed assets subject to a maximum of As. 15 lakhs for tiny, small, medium and large scale industries.

Zone III              20% of the value of fixed assets subject to a maximum of As. 20 lakhs for tiny, small, medium and large scale industries.

Zone IV         25% of the value of fixed assets subject to maximum of As. 25 lakhs for tiny, small, medium and large scale industries.

NOTE

The total quantum of investment subsidy for any industrial unit shall not exceed the prescribed ceiling limit including for expansion, modernisation, diversification. (Inclusive of the incentives availed under the earlier packages).

2.3 Pioneer Unit Subsidy:

An additional investment subsidy of Rs. 25.00 lakhs shall be granted for all new industrial investments beyond Rs. 25.00 crores in fixed assets to be set up in Zone-III and Zone-IV areas provided such industrial investments lead to creation of employment opportunities for atleast 500 persons and also has substantial scope for promotion of ancillary and sub-contract units. This subsidy shall be available for only first five units to be set up in each taluk under Zones-III & IV and the units should commence commercial production before 30.9.1995. However, the State level committee is empowered to extend for a period of 12 months, the validity of this benefit to commence commercial production beyond 30.9.95.

2.4 Sales Tax (ST) Concessions:

2.4.1 Khadl and Village Industries Sector (KVI's) :

All KVI Units as defined under the Khadi and Village Industries Act, 1956. as amended from time to time shall be exempted from payment of Central Sales Tax (CST) & Karnataka Sales Tax (KST).

2;4.2 Tiny, Small, Medium & Large Scale Industries:

All new industrial units in the above sector shall be exempted from payment of ST (CST & KST)

on the output of such industrial units as per details given below:

2.5 Special Concessions to Thrust Sectors:

All New Tiny, Small, Medium and Large Scale Industrial Units in THRUST SECTOR as defined in Annexure II shall be eligible for enhanced incentives and concessions as per details given below:

NOTE:

1) To be eligible for special concessions as mentioned above industrial units will be required to produce a certificate from the Department of I & C specifying therein the category of Thrust Sector under which the industry is considered and the special concessions that are to be extended.

2) Agro-Food Processing, Agro based (Industrial High-Tech Packaging units, Cold Storages, Green Houses. Tissue Culture Laboratory, Bio-fertiliser, Bio-technology, Compost, Growth regulators and Seed production) and Informatics / Software units / industries setup within the Bengaluru Urban Agglomeration areas and Mysore City Corporation areas in the Tiny and Small Scale Sector shall also be eligible for the special concessions as specified in (a) of the above table.

3) 100% EOU's setup in Zone I including Bengaluru Urban Agglomeration areas and Mysore City Corporation area will be eligible for incentives and concessions as specified in (a) of the above table.

2.6 Special concessions for Electronic, Telecommunication and Informatics (Software) Industries to be setup in Electronic Cities at Mysore and Dharwad :

Electronic, Telecommunication and Informatics (Software) Industries to be setup in Mysore and Dharwad Electronic Cities shall be eligible for the investment subsidy as applicable in Zone IV area. Further these units shall also be eligible for 100% Sales Tax, (KST & CST) exemption also on output for a period of 6 years.

These special incentives are offered in lieu of the normal incentives as detailed in paras 2.2 & 2.4 above.

2.7 Special concessions for 100% Export Oriented Industries

Vide Government Order No. CI/384/SPC/89 dated 29.11.1989, the following additional concession have been extended to 100% EOUs:

a)To offer a capital investment subsidy of 10% of the value of fixed assets subject to a ceiling of As. 10.00 lakes to the units proposed to be setup in the EOIZ, Bengaluru, and also to all 100% EOU's setup in Zone-II and Zone-III provided the units achieve a value addition c atleast 25% and also employ local labour to the extent of atleast 80% of the requirement

b)Exemption from payment of Entry Tax on all raw materials. components. etc., procured for processing in the EOIZ I EOUs irrespective of ,their location; and

c)All EOUs setup in the State to be exempted from the power cuts imposed by KEB on industries concerns from time to time.

These concessions except for the investment subsidy as at sub-para (a) above shall be continue, and extended to Zone-IV areas also and shall continue to be available in the redefined zones to the expiry of this Government Order (Le. till 30.9.1995).

In addition to the above concessions 100% EOU's to be setup in EOI.l, Bengaluru and in Zone_ II, III & IV shall be exempted from payment of ST payable on raw materials. components, packaging materials, consumables, capital goods, spares, material handling equipment, intermediates and semi finished goods and sub-assemblies procured from industrial units within the State (from the domestic tariff. area).  

2.8 Additional Concessions to Special Categories of Entrepreneurs:

An additional investment subsidy of 5% of the value of fixed assets subject to a ceiling of Rs. 1.00 lakh shall be extended for entrepreneurs in the specified categories mentioned below;

a) Scheduled Caste and Scheduled Tribes;

b) Minority Communities; (as specified by the State Minorities Commission)

c) Women Entrepreneurs;

d) Physically Handicapped Entrepreneurs;

Ex-Servicemen.

This additional' subsidy is applicable to only Tiny and Small Scale units in Zones II, III & IV and shall be over and above the normal investment subsidy as specified in Para-2.2 . above. However entrepreneurs who are covered under more than one special category of entrepreneurs a defined above shall be eligible for additional investment subsidy under any ONE of the special categories only.

2.9Incentives for Installation of Pollution Control Equipment and for Utilisation of Non-Conventional Energy Sources:

All industrial units, both new and existing, which install pollution control equipment and/or equipment for utilisation of non-conventional energy sources shall be eligible for an additional 5% investment subsidy on the cost of such equipment subject to a ceiling of As. 5.00 lakhs. This subsidy shall be over and above the normal subsidy as specified in Para-2.2 and shall be available to .all the units irrespective of their location and size.

2.10 Exemption from Stamp Duty and-Concessional Registration Charges:

Tiny and Small Scale Industries setup any where in the State, except in Zone-I, shall be eligible for exemption of stamp duty and concessional registration charge. on loan and credit documents to be executed for availing financial assistance from State Government, and/or recognised financial institutions and also lease/sale deeds executed by the new industrial units in the Tiny and Small Scale Sectors for sheds/plots taken on lease-cum-sale basis from KSSIDC, KIADB, KEONICS, or from any other Government agencies.

2.11 Waiver of Conversion Fee for Converting Agricultural Lands to Industrial Lands:

Payment of conversion fee for converting the lands from agricultural use to industrial use shall be waived for only Tiny and SSI units setup in Zone-III and Zone-IV areas. This waiver shall be limited to the maximum extent of 2 acres of land only.

(Separate orders' in respect of para 2.10 and 2.11 will be issued by the Revenue Dept.)

2.12 Incentives For Rehabilitation of Sick Industries:

Vide G.O. No. CI/151PUM/86 dated 17.10.1988, Government have extended several reliefs and concessions to the sick industrial units in Karnataka if and when the rehabilitation of the said units are finalized by Board for Industrial and Financial Reconstruction/Financial Institutions 

The package of reliefs and concessions as contained in the said G.O. shall be extended till expiry of this package of incentives and concessions (Le. upto 30.9.1995). The said package of incentives and concessions shall also be extended to the sick industries in the Tiny / Small Scale and Cooperative Sector, particularly the Textile and Sugar Co-operatives when rehabilitation' of such industrial units are taken up by the - DCC Banks or the Apex Bank in respect of Co-operative units and by KSFC/Commercial Banks and other approved financial institutions in respect of Tiny and Small Scale units.

In addition to the above reliefs and concessions, the benefit of recovery of sales tax arrears in a maximum of 5 annual instalments, from the date of implementation of rehabilitation proposal, shall also be extended to all sick industrial units, including co-operative and SSI units and those taken up by BIFR, provided these are approved by the High level Committee for BIFR/Co-operative units and the State level Committee in case of Tiny/SSI units.

2.13 Rectification Of Anomalies In The Earlier Packages Of Incentives And Concessions

a) In the package of incentives for the period 1.11.1982 to 31.10.1987, sanction of development

Ioan/working capital loan was offered to the industrial units. Benefits under this package was continued till 31.3.1988 except the development loan. Development loan was discontinued and withdrawn in the revised package of incentives vide G.O. No. CI:146:8PC:88, Dt. 5.12.1988 effective from 1.4.1988, which offered 8T exemption/deferment in lieu of development loan/working capital loan. However, industrial units which were established during. the period 1.11.1987 and 31.3.1988 have been deprived of both the benefits i.e., development /working capital loan and 8T exemption/ deferment. This anomaly has to be corrected. Therefore, such of those industrial units which were established during the period 1.11.1987 and 31.03.1988, and which have not availed either development /working capital loan or 8T exemption/deferment shall be eligible for 8T exemption! deferment as per the G.O. No.:CI:146:8PC:88, Dt. 5.12.1988 for the period reckoned from the date of commencement of commercial production of respective units.

b) The Government of India revised the definition of 881 and ancillary units vide Notification No.:10/ 37/85-LP - Press note No.9, dated 19th March 1985, increasing the limits for investment in Plant and Machinery for 881 units from As. 20 lakhs to As. 35 lakhs and in case of Ancillary units from As. 25 lakhs to As. 45 lakhs. This was not given effect to be Government of Karnataka for the purpose of availment of incentives and concessions by the entrepreneurs who setup units after the above dates. Those units who were denied the facility because their investment in Plant and Machinery was above As. 20 lakhs for 881 units and As. 25 lakhs for Ancillary units, shall be eligible for the incentives as per the prevailing incentives and concessions at that time, provided a certificate to that effect is given be Director of Industries & Commerce and these units shall be sanctioned eligible incentives.

2.14 Special Incentives for Large Industrial Investments.

Additional Incentives and concessions if any to be offered for large industrial investments involving capital outlay of more than As. 100 crores will be decided by the Government on case to case basis depending upon the location, employment potential, scope for development of ancillary and down stream industries etc.

3.0. SANCTION OF INCENTI_ES AND CONCESSIONS AS PER THIS G.O. IS SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS:

a)All new industrial investments shall create maximum possible additional employment opportunities and provide minimum 80% of employment to the local people (100% employment to local people in case of Group C & D categories will be insisted) and this will be monitored during disbursement of incentives and concessions.

b) These incentives and concessio:1s shall not be available for the units listed in Annexure-III irrespective of the location.

c) The incentives and-concessions as per this G.O. shall be applicable only to all new investments made on or after 1st October 1990.

d) The quantum of investment subsidy shall be computed on the value of fixed assets as approved by the Financial Institutions/Commercial Banks wherein the entrepreneurs have availed the loans or actual investment as certified by the Chartered Accountant wherein no financial assistance is availed from the Financial Institutions/Commercial Banks.

e) These incentives and concessions shall also be available for investments made for expansion, diversification and modernisation, but limited to the extent of additional capacity created out of such investment.

f) In case of growth centres, incentives & concessions as per this G.O. will be available for the units setup in the specified industrial areas/estates developed by State Govt. agencies.

g) The total investment subsidy including additional subsidy available as per paras (2.5 & 2.8) shall not exceed 20%, 25% and 30% of the value of - fixed assets subject to the ceilings of As. 20 lakhs, As. 25 lakhs, and As. 30 lakhs respectively, in Zone II, Zone III and Zone IV respectively. However this will not cover pi0neer unit subsidy which shall be treated separately.

h) The definition of tiny, small, medium and large scale industries as indicated in Annexure IV to this Government Order shall automatically stand revised as and when GOI makes any change in such definition and benefits under this package shall be available to the tiny, SSI, medium and large units as per the new definition, from the respective dates.

i) The validity of Incentives and concessions as per this order shall be for a period of five years from 01.10.1990 till 30.9.1995.

j) With the issue of this G.O. incentives and concessions extended vide G.O.'s issued earlier shall automatically cease to continue except to the extent of specific provisions made in this G.O. with reference to the earlier G.O.'s. However, industrial units which have already been sanctioned incentives and concessions under the earlier package / G.O. shall continue to enjoy those benefits as per the sanction orders already issued, and,

k) Separate guidelines for administration of these incentives and concessions will be issued for the guidance of the concerned agencies and officers. Interpretation of this G.O. and the decision thereon of the State Level Co-ordination Committee, under the Chairmanship of the Secretary, Commerce and Industries Department shall be final.