1. Make in India- Incentives for SME’s At a Glance
At the IPF Industrial Excellence Awards
20th December 2017

2. Indian economy: a dichotomy
Indian Economy Projections
3rd Largest in the World by Purchasing Power Parity
10th Largest in the World by Nominal GDP
Projected to be 3rd Largest in the World by Nominal GDP by 2030
Projected to be of similar size as that of US by 2050
Ease of Doing Business Rankings 2017
Where do we stand among 189 countries
India Overall Rank: 100 (Jumped up by 30 places as against previous year ranking of 130)
India Rank: Paying Taxes: 119 (Jumped up by 53 places as against previous year ranking of 172)
The Country requires some massive regulatory and tax reforms to be considered as a preferred destination in terms of ease of doing business.
GST is one of such massive tax reform in this direction.

3. SME’s – Definition & Benefits

4. Definition & Classification
Classification of the entity depends on “Investment in Plant & Machinery or Equipment”
Figures in bracket indicate the proposed limits as per MSMED Amendment Bill, 2015
Type of Unit
Manufacturing
(Invt. in Plant & Machinery) (₹)
Service
(Invt. in Equipment) (₹)
Micro
25 Lakhs (50)
10 Lakhs (25)
Small
5 Crores (10)
2 Crores (5)
Medium
10 Crores (30)
5 Crores (15)

5. Benefits of Registration under the MSMED Act
Sec.15: Buyers liability to make payment - Binds the OEM’s to make payment to the SME’s on the purchases made from the SME’s
Sec.16: Interest on delayed payments - Monthly Compounded Interest Liability is infused on the OEM’s in case of delayed payments as per the statute
Sec.17: Payment with Interest – Requires the OEM’s to make the payment along with the interest
Sec.18: Arbitration & Conciliation – Dispute with regards to any amount due u/s 17, to be referred to MSE Facilitation Council. The Council will then address the conciliation as per the provisions of Arbitration and Conciliation Act, 1996
Sec.23: Interest not deductible – Notwithstanding anything contained in the Income Tax Act,1961, the amount of interest payable or paid by any buyer, is disallowed as deduction

6. Interest paid by Corporates ₹
Sector
Delayed Payment
Interest
In Crores
OEM 1
18.21
1.07
125.55
1.15
122.51
1.17
3.39
OEM 2
645.15
6.03
564.84
5.36
690.76
6.11
17.50

7. Promoting Make in India under various statutes – at a Glance

8. Incentive for employment generation
Income Tax Act, Section 80JJAA
Deduction of 30% of the additional wages now extended to all sectors for 3 years
Deduction available in respect of cost incurred on new employees whose total emoluments do not exceed ₹25,000 per month
Certain other conditions required to be satisfied to claim the deduction
Number of days of employment reduced to 240 from 300
Requirement of increasing workforce by 10% every year removed
Threshold of minimum number of employees done away with

9. Incentive Schemes under Foreign Trade Policy
Merchandise Exports from India Scheme (‘MEIS’)
Export of notified products to notified markets. Entitled for Duty credit scrip equivalent to 2% to 7% on value of exports, utilized for payment of Customs Duty
Service Export from India Scheme (‘SEIS’)
Export of notified services. Entitled for Duty credit scrip equivalent to 3% to 7% of net foreign exchange earned utilized for payment of Customs Duty
Chapter 3 of the FTP
Chapter 3 of the FTP
Chapter 5 of the FTP
Chapter 4 of the FTP
Advance Authorisation
To enable duty free import of inputs for export production, AA is issued to allow duty free import of input, which is physically incorporated in export product `
Export Promotion Capital Goods (‘EPCG’)
EPCG scheme allows import of Capital Goods for pre production, production and post production at Zero customs duty against discharge of an export obligation

10. Authorized Economic Operator
TIER I
TIER II
TIER III
High Facilitation – Shorter Cargo Release time
Direct Port Delivery (DPD) of their import Containers
Direct Port Entry (DPE) of their Export Containers
Bank Guarantee to the extent of 50%
Expedited investigation – Dispute Resolution
On Request 24 X 7 at all Sea Ports and Airports
Onsite Audit once in 2 years
ID Cards / Space in warehouse
on arrival/Departure
All Benefits as available under Tier I
Seal verification/scrutiny of documents by Custom officers would be waived
Containers scanning on priority
Facility of deferred payment of duty
Faster disbursal of drawback amount
BEs/SBs Assessment and/or Examination on priority
Self -sealing of export goods without Permission
Faster completion of SVB proceedings
Bank Guarantee of 25%
Onsite Audit once in 3 years
Submission of paperless declarations
DC / AC as a single point of interaction as CRM
Trade facilitation by a foreign Customs
Refund/Rebate granted within 45 days
All Benefits as available under Tier I & Tier II
No Container scanning
Rely on the self-certified copies of documents
No Bank Guarantee
Refund/Rebate of Customs/Central Excise duty and Service Tax would be granted within 30 days
AEO programme applicability : minimum 25 Import/Export declarations during the last financial year (i.e. Bill of Entry or Shipping Bills)

11. Fiscal Incentives – Central & State Government

12. III. Competitive federalism
Competitiveness amongst states
Industrial Policies by the states every 5 years
98 point action plan by DIPP in December 2014 were assessed by June 2015
Subsequently a 340 point action plan was released to be assessed in 2016
Top 10 states in implementation of the 340 point action plan :
Rank
State 1
Andhra Pradesh 6
Haryana 2
Telangana 7
Jharkhand 3
Gujarat 8
Rajasthan 4
Chhattisgarh 9
Uttarakhand 5
Madhya Pradesh 10
Maharashtra

13. Fiscal Incentives
To promote investments, incentives are offered by the states which are equally available to all enterprise– Indian or Foreign, setting up new operations or expanding operations in India
Incentives by Centre – Foreign Trade Policy and Sector Specific Policy
Incentives by State – Sector Specific Policy and Industrial Policy
State Incentives can range from 30% to 100% of the project cost which impacts the cash flows and payback period
Quantum of incentives vary based on location of unit in the state and amount of investment
Sector specific policies for notified products like MSIPS, Aerospace etc
Fiscal Incentives schemes will be suitably amended in the ` GST regime

14. Nature of fiscal incentives
Capital Linked
Cash Back
Expenditure Linked
Exemption/ Cash Back
Sales Linked
Domestic Sales – Sales Tax linked
Capital Linked : A percentage of capital investment is received as a capital subsidy
Expenditure Linked : Incentive is available as cash refund/exemption of costs like electricity duty, power tariff, stamp duty
Sales Linked : Specified percentage of sales tax paid (VAT/CST/GST) to the state government is given as a subsidy

15. Parameters To Be Considered
Location & Investment: To evaluate the maximum benefits that can be availed
Sector: To identify the incentives by sector specific policies
Sales Pattern: To identify and quantify incentives available under the foreign trade policy and state industrial policy
Expenditure: To quantify the incentives linked to expenditure

16. Fiscal Incentives – Mechanism of Sales Tax Linked
Cash Back
Deferral
Retention
Collect
Collect
Collect
Pay
Retain
Retain
Refund
Pay

17. Overview of incentives across some states
Nature of Incentives
Maharashtra
Karnataka
Andhra Pradesh
Tamil Nadu
VAT/CST/GST Linked
Available
Stamp duty
Electricity duty exemption
Not Available
Power tariff
Interest subsidy
Capital subsidy
Available (to a nominal extent)
Entry Tax

18. Overview of incentives across some states
Nature of Incentives
Gujarat
Haryana
Rajasthan
VAT/CST/GST Linked
Available
Stamp duty
Not Available
Electricity duty exemption
Power tariff
Interest subsidy
Capital subsidy
Entry Tax

19. v/s
India ranks 81 out of 141 countries in the innovation index 2015

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