North Eastern States A new phase of Development

NORTH EASTERN STATES - A GROWING HUB OF

INDUSTRIES

FOREWORD

The North eastern region comprises of eight states - Arunachal Pradesh, Manipur, Meghalaya, Mizoram,

Nagaland, Sikkim, Tripura and Assam. Indias north east region (NER) is endowed with huge untapped

natural resources and is acknowledged as the eastern gateway for the countrys Look East Policy. In

spite being endowed with vast natural resources the region has remained largely underdeveloped.

The government has taken several steps to overcome the infrastructural issues by strong focus on roads,

airports and hydropower developments in the initial phase to induce sustainable development in the

region. The Vision 2020 document makes it clear that the long-term economic development of the

Northeast will be achieved through private sector investment.

TAX INCENTIVES & SUBSIDIES

Subsidies Sharing by All States mentioned above

TRANSPORT SUBSIDY-

The Transport Subsidy Scheme was announced on 23.7.1971. The Scheme was introduced to develop

industrialization in the remote, hilly and inaccessible areas by providing for subsidy in the transportation

cost incurred by the industrial units so that they could stand competition with other similar industries,

which are geographicallylocated in better areas.

Applicability : The Scheme is applicable to all industrial

units (barring plantations, refineries and power generating

units both in public and private sectors irrespective of

their size)

Coverage : -

8 States of the North East India (mentioned above)

- H.P.

- Uttarakhand

- J&K

- Darjeeling District of West Bengal

- Andaman & Nicobar Administration

- Lakshadweep Administration

Period of eligibility: The subsidy is eligible to a unit

for a maximum period of five years from the date of

Quantum of Subsidy:

Subsidy ranging between 50% and 90%

of the transport cost for transportation

of raw material and finished goods to

and from the location of the unit and

the designated railhead. (For North

East States, J&K and UTs, the subsidy is

90%. For H.P. and Uttarkhand and Dar-

jeeling District of West Bengal, the sub-

sidy is 75%. However, for movement of

goods within NER, the subsidy is 50%.)

North Eastern States A new phase of Development

commencement of commercial production.

NORTH EAST INDUSTRIAL AND INVESTMENT PROMOTION POLICY

NEIIPP, 2007

(i) Coverage:-The North East Industrial Policy (NEIP), 1997 announced on 24.12.1997 covered the

States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura.

Under NEIIPP, 2007, Sikkim will also be included.

(ii) Duration: All new units as well as existing units which go in for substantial expansion, unless

otherwise specified and which commence commercial production within the 10 year period

from the date of notification of NEIIPP, 2007 will be eligible for incentives for a period of ten

years from the date of commencement of commercial production. (10 years ending 2017)

(iii) Substantial Expansion: Incentives on substantial expansion will be given to units effecting an

increase by not less than 25% in the value of fixed capital investment in plant and machinery

for the purpose of expansion of capacity/modernization and diversification, as against an

increase by 33 % which was prescribed in NEIP, 1997.

(iv) Excise Duty Exemption: 100% Excise Duty exemption will be continued, on finished products

made in the North Eastern Region, as was available under NEIP, 1997. However, in cases,

where the CENVAT paid on the raw materials and intermediate products going into the pro-

duction of finished products (other than the products which are otherwise exempt or sub-

ject to nil rate of duty) is higher than the excise duties payable on the finished products,

ways and means to refund such overflow of CENVAT credit will be separately notified by the

Ministry of Finance.

(v) Income Tax Exemption: 100% Income Tax exemption will be continued under NEIIPP, 2007 as

was available under NEIP, 1997.

(vi) Capital investment subsidy: Capital Investment Subsidy will be enhanced from 15% of the in-

vestment in plant and machinery to 30% and the limit for automatic approval of subsidy at

this rate will be Rs.1.5 crores per unit, as against Rs.30 lakhs as was available under NEIP,

1997.subsidies higher than 1.5 crore but upto 30 crores can be granted with a prior approval

of Empowered Committee chaired by Secretary, Department of Industrial Policy & Promo-

tion with Secretaries of Department of development of North Eastern Region(DONER).even

if the union cabinet gives its approval then subsidies higher than the 30 crore can also be

granted.

(vii) Interest subsidy : Interest Subsidy Will Be Made Available @ 3% On Working Capital Loan.

(viii) Comprehensive insurance : All Units Will Be Eligible For 100% Reimbursement Of Insurance

Premium.

North Eastern States A new phase of Development

Other Sectors Which Are Eligible To Claim These Subsidies-

I. Service Sector:

(i) Hotels (not below Two Star Category), adventure and leisure sports including ropeways;

(ii) Medical and health services in the nature of nursing homes with a minimum capacity of 25 beds and

old-age homes;

(iii) Vocational training institutes such as institutes for hotel management, catering and food crafts, en-

trepreneurship development, nursing and para-medical, civil aviation related training, fashion, design

and industrial training.

A number of tax concessions under the existing provisions of Section 10A and 10AA of the Income Tax

Act are already available to the IT Sector. However, one of the important impediments to the develop-

ment of Software Technology Parks or IT related SEZs in the North Eastern Region is the non-availability

of trained human resources in the North Eastern Region. Accordingly, tax benefits as is availed under

Section 80 IC of the Income Tax Act would be extended to IT related training centers and IT hardware

units.3

II. Incentives for Bio-technology industry:

The bio-technology industry will be eligible for benefits under NEIIPP, 2007, as applicable to other indus-

tries.

III. Incentives for Power Generating Industries:

Power Generating plants will continue to get incentives as governed by the provisions of Section 81A of

the Income Tax act. In addition, power generating plants upto 10 MW based on both conventional and

non-conventional sources will also be eligible for capital investment subsidy, interest subsidy and com-

prehensive insurance as applicable under NEIIPP, 2007.

Example of Benefits made Available by Individual States:

ASSAM (other states also offer similar benefits)

A State Capital Investment Subsidy

30% of capital Investment Ceiling Rs. 20.00 Lakh per project

B Subsidy for preparation of Project Report

90% of the cost of the Project Re-port

Ceiling Rs. 2.00 Lakh per re-port

C Interest Subsidy @ 4% on interest payment to Bank and Financial Institution

Ceiling Rs. 0.20 Lakh per month

D Local Employment Pro-motion Grant

30% of the wage bill for local tribal employee

Ceiling Rs. 1.00 Lakh per an-num for 3 years.

North Eastern States A new phase of Development

10% on the cost incurred on Train-ing of Local Tribal Employee.

E Subsidy on Power

Power Tariff -20 % for load up to 2 MW 30 % for load above 2 MW

Drawal of Power Line For drawal of 33 KV and above

Ceiling Rs. 7.00 Lakh per an-num

F Subsidy on Quality Con-trol Measures

Cost of Lab Equipment for quality control

Ceiling Rs. 5.00 Lakh

G Subsidy on Pollution Con-trol

7 years from the date of Commer-cial Production

Ceiling Rs. 0.40 Lakh

H Sales Tax Exemption CST paid on purchase of machinery and equipment would be reim-bursed

Rs. 0.75 Lakh

I Refund of Central Sales Tax (CST)

Up to 75 % of the amount for exe-cution of Deeds pertaining to loans from Financial Institution and Bank

J Exemption from Stamp Duty

An additional 5% Capital Investment Subsidy subject to a maximum of Rs. 5.00 Lakh

K Special Incentives for Ex-port Oriented Units

Sales Tax exemption for an addi-tional period of 1 year.

Investment subsidy of 15% (up to Rs 350,000) of fixed assets for small-scale units

Investment subsidy of 30% of fixed assets (up to Rs 2,000,000) for medium and large-scale industries

An additional 5% capital investment subsidy (up to Rs 500,000) for 100% EOUs

90% Transport Subsidy for procurement of raw materials up to the Siliguri rail-head

Power subsidy of 30% on loads up to 2.5 MW for medium and large-scale units

5-year income tax holiday for new industrial units set up in the Northeast

Sales tax exemption (up to 9 years) on finished goods for small scale units

20% rebate on the cost of training local tribals, provided the trainee is employed by the unit.

All eligible units, which manufacture goods in Assam, will be entitled to exemption of 99% of the tax payable under the Assam Value Added Tax Act, 2003 and the Cen-tral Sales Tax Act, 1956.

For further information or details, please contact Pipara & Co. For Private Circulation and referral purposes only.