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The government of Maharastra has enlarged the scope of incentives to promote micro, small and medium enterprises (MSMEs) in the state in its latest industrial policy announced for the period 2013-2018. It has a three-tier incentive structure -– industrial promotion subsidy linked to all taxes paid, interest subsidy on interest paid on term loans and incentives for quality enhancing, quality competitiveness, credit rating and technology upgradation.
While this policy continues with power tariff subsidy, waiver of stamp duty and exemption of electricity duty as was in the earlier policy 2007-2012, it has discontinued the royalty refund paid on purchase of minerals from mine owners within the state of Maharashtra .
Explaining this, official sources said that the present policy is aimed strengthening the MSME sector to combat the impact of imported goods in the market. The difference with the earlier policy pertaining to MSME is that under the earlier policy, the industrial subsidy was limited unto refund of octroi or entry tax payable and capped at 25 per cent of relevant taxes paid by the eligible unit. This policy is far more generous than that, they said.
To begin with the total subsidy -- interest subsidy, industrial promotion subsidy and incentives is -- linked to the total fixed capital investment. While under the 2007 policy, the ceiling of subsidy varied from 20 per cent to 60 per cent of fixed capital investment across units (developed in no-industry district) over 5-10 years, the 2013 policy extends it by 20 per cent to 100 per cent of fixed capital investment over 7-10 years. Units in Naxal districts get subsidy up to 100 per cent of the investment.
The industrial promotion subsidy linked to taxes paid under the 2013 policy exceeds the taxes paid in all cases. In every category, the government will be subsiding the VAT (value added tax) paid minus the input tax credit, and over that central sales tax paid and certain percentage of the input tax credit, which the unit is entitled to get from the government. That means the government will, in fact, be giving more than the taxes paid as input tax credit (ITC). ITC is the amount which a business may claim from the tax department as a result of paying value-added taxes on goods or services acquired.
In incentives to upgrade quality, the government has added a new entity -- incentives for credit rating of MSMEs -- where 75 per cent of cost for getting a credit rating will be subsidised. In the process of getting a rating, these units will get subsidy up to 75 per cent of cost of water audit upto a ceiling of Rs 1 lakh, 75 per cent of cost of energy audit (up to Rs 2lakh), 50 per cent of the cost of capital equipment for water conservation and energy efficiency separately (up to Rs 5 lakh in each case). Further, it continues with the five per cent subsidy on capital equipment for technology upgradation and 25 per cent subsidy on capital equipment for cleaner production measures unto ceiling of Rs 25 lakh and Rs 5 lakh respectively. Meanwhile, it has substantively increased the subsidy for quality certification measures and patent registration (upto 75 per cent of the expenses as against 50 per cent earlier).
The period for electricity duty exemption for the lesser industrial areas has been reduced from 10 years in 2007 policy to seven years in the new policy.
