GOVERNMENT OF TAMIL NADU

ABSTRACT

Small Industries - Incentives available to small scale industrial units – Consolidated Instructions – Orders issued.

SMALL INDUSTRIES (E.III) DEPARTMENT

G.O.Ms.No.37,                                                                                  Dated:20..7..2000.

 

Read:

 

From the Industries Commissioner & Director of Industries and Commerce, D.O.Lr.No.15616/LC.3/98, dated:22.3.99 and 24.11.1999.

ORDER:

Promotion of industrial growth is a declared policy of the State Government for encouraging growth of industries in an uniform manner. Both the Union and State Governments have been extending various subsidies/incentives scheme to industrial units set up in most backward/backward areas. Even after Government of India dispensed the scheme, the Government of Tamil Nadu continues this scheme with a view to have industrial growth particularly in most backward/backward blocks. In addition, a special subsidy scheme for thrust sector industries like Electronics, leather, etc., subsidy for Generator-set and Low Tension Power Tariff subsidy schemes were also formulated by the State Government.

2. Various orders have been issued by the Government on the incentives extended to the small scale industries from time to time. Similarly, the Industries Commissioner & Director of Industries and Commerce has also issued various instructions in the mater. It has been observed that the implementing agencies are not fully aware of the various orders/instructions in force from time to time, resulting in irregular sanctions which lead to audit objections, etc.

 

3. The Government considered the difficulties faced by the implementing agencies due to the unawareness of various instructions/clarifications issued on incentives available from time to time. To overcome the difficulties, the Government, in supersession of all the earlier orders/instructions issued, issue the consolidated orders as detailed in Chapter 1 to 18 below.

4. All the implementing agencies, viz., Industries Commissioner & Director of Industries and Commerce, Tamil Nadu Industrial Investment Corporation, SIPCOT, etc., are directed to follow scrupulously the guidelines given below.

CHAPTER 1

 

DEFINITIONS

Small Scale Industrial Undertaking:

An industrial undertaking in which the investment in fixed assets in Plant and Machinery whether held in ownership terms or on lease or by hire purchase does not exceed Rs. 100 lakhs is called a Small Scale Industrial Undertaking.

Ancillary Industrial Undertaking:

An industrial undertaking which is engaged or proposed to be engaged in the manufacture or production of parts, components, sub-assemblies, toolings or intermediates or the rendering of services and the undertaking supplies or renders or proposes to supply or render not less than 50% of its production or services as the case may be to one or more other industrial undertakings and whose investment in fixed assets in Plant and Machinery whether held on ownership terms or on lease or on by hire purchase does not exceed Rs. 100 lakhs is called an Ancillary Industrial Undertaking.

Small scale (Industry related) Service and Business Enterprises (SSSBE)

Industry related Service and Business Enterprises with investment upto Rs. 5 lakhs in fixed assets excluding Land and Building are called Small scale (Industry related) Service and Business Enterprises (SSSBE).

Tiny enterprises:

All small scale units with investment limit in Plant and Machinery upto Rs. 25 lakhs irrespective of the location of the unit are called Tiny enterprises.

Export Oriented Units:

Units having fixed assets in Plant and Machinery not exceeding Rs. 100 lakhs and which undertake to export atleast 30 % of its current production by the end of 3rd year from the date of its commencing of production are called Export Oriented Units (EOU)

 

CHAPTER 2

CLARIFICATIONS REGARDING PLANT AND MACHINERY

Certain clarifications and explanations have been issued from time to time by the Government of India regarding computation of investment in fixed assets in plant and machinery of a small scale/ancillary industrial undertaking. These would continue to hold good and are reproduced below for the sake of convenience.

LIST OF ITEMS TO BE INCLUDED/ EXCLUDED FOR THE PURPOSE OF COMPUTATION OF VALUE OF INVESTMENT IN PLANT AND MACHINERY IN SMALL SCALE INDUSTRY.

2.1 Item to be included.

In calculating the value of plant and machinery the original price thereof, irrespective of whether the plant and machinery are new or second hand, shall be taken into account.

 

2.2 Item to be excluded.

 

In calculating the value of plant and machinery, the following shall be excluded, namely: -

 
  1. the cost of equipments such as tools, jigs, dies, moulds and spare parts for maintenance and the cost of consumable stores;
  2. the cost of installation of plant and machinery;
  3. the cost of research and development equipment and pollution control

    4. equipment;

  4. the cost of generation sets and extra transformer installed by the

    5. undertaking as per the regulations of the State Electricity Board;

  5. the bank charges and service charges paid to the National Small Industries

    6. Corporation or the State Small Industries Corporation;

  6. the cost involved in procurement or installation of cables, wiring, bus bars,

    7. electrical control panels (not those mounted on individual machines), oil

    circuit breakers or miniature circuit breakers which are necessarily to be

    used for providing electrical power to the plant and machinery or for

    safety measures;

  7. the cost of gas producer plants;
  8. transportation charges (excluding of sales-tax and excise) for indigenous

    9. machinery from the place of manufacturing to the site of the factory;

  9. charges paid for technical know-how for erection of plant and machinery;
  10. cost of such storage tanks which store raw materials, finished products only

    11. and are not linked with the manufacturing process; and

  11. cost of fire fighting equipments.
    1. The case of imported machinery, the following shall be included in calculating the value, namely:-

i) import duty (excluding miscellaneous expenses as transportation from

the port to the site of the factory, demurrage paid at the port);

ii) the shipping charges;

iii) customs clearance charges; and

iv) sales tax.

CHAPTER 3

TYPES OF OWNERSHIP OF SSI UNITS

The forms of ownership of an SSI unit are of three types viz. Proprietory, partnership & Company the definitions of which are given below.

3.1 Proprietory concern

A sole proprietorship or one man business is a form of organisation in which an individual produces independently with his own capital, skill and intelligence and is entitled to receive all the profits and assumes all the risks of ownership.

3.2 Partnership concern

Partnership is the relation between the persons who have agreed to share profits of a business carried on by all or any of them acting for all.

3.3 Company

A company is a voluntary association of persons recognised by law having a distinctive name, a common seal formed to carry on business for profit, with capital divisible window transferable shares, limited liability, a corporate body and perpetual succession.

The assets and liabilities are owned by the company. The assets and liabilities will be shared according to the holdings of the shares in the company.

No small scale or ancillary industrial undertaking referred to above shall be subsidiary of, or owned or controlled by any other industrial undertaking.

Explanation

  1. "Owned" shall have the meaning as derived from the definition of the expression

    2. "owner" specified in clause (f) of section 3 of the Industrial (Development and Regulation) Act 1951 1

  2. "Subsidiary" shall have the same meaning as in clause (47) of section 2, read

with section 4, of the Companies Act, 1956 (1 of 1956) 2

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------1 Section 2, clause (f) of Industries (Development and Regulation) Act, 1951

Meaning of "owner"

"owner" in relation to an industrial undertaking, means the person who, or the authority which, has the ultimate control over the affairs of the undertaking, and, where the said affairs are entrusted to a manager, managing director or managing agent, such manager, managing director or managing agent shall be deemed to be the owner of the undertaking;

2 Section 4 of Companies Act, 1956

Meaning of "holding company" and "subsidiary"

For the purpose of this act, a company shall, subject to the provisions of sub-section (3), be deemed to be a subsidiary of another if, but only if,

    1. that other controls the composition of its Board of directors: or
    2. [ (b) that other-
    1. where the first- mentioned company is an existing company in respect of which the holders of preference shares issued before the commencement of this Act have the same voting rights in all respects as the holders of equity shares, exercises or controls more than half of the total voting power of such company:
    2. where the first mentioned company is any other company, holds more than half in nominal value of its equity share capital: or]

(c) the first-mentioned company is a subsidiary of any company which is that other’s subsidiary.

(C) the expression "controlled by any other industrial undertaking" means

as under:-

 
  1. where two or more industrial undertakings are set up by the same person as a proprietor, each of such industrial undertakings shall be considered to be controlled by the other industrial undertakings or undertakings,
  2. Where two or more industrial undertakings are set up as partnership firms under the Indian Partnership Act, 1932 (1 of 1932) and one or more partners are common partner or partners in such firms, each such undertakings shall be considered to be controlled by the other undertakings or undertakings,
  3. where industrial undertakings are set up by companies under the Companies Act, 1956 (1 of 1956), an industrial undertaking shall be considered to be controlled by other industrial undertaking if,-

 
    1. the equity holding by other industrial undertaking in it exceeds twenty four percent of its total equity, or
    2. the management control of an undertaking is passed on to the other industrial undertaking by way of the Managing Director of the first mentioned undertaking being also the Managing Director or Director in the other industrial undertaking or the majority of Directors on the Board of the first mentioned undertaking being the equity holders in the other industrial undertaking in terms of the provisions of the following items (a) and (b) of sub-clause(iv);
  1. the extent of equity participation by other industrial undertaking or undertakings in the undertaking as per sub-clause (iii) above shall be worked out as follows:-
    1. the equity participation by other industrial undertaking shall include both foreign and domestic equity:-
    2. equity participation by other industrial undertaking shall mean total equity held in an industrial undertaking by other industrial undertaking or undertakings, whether small scale or otherwise, put together as well as the equity held by persons who are 'Directors in any other industrial undertaking or undertakings even if the person concerned is a Director in other Industrial Undertaking or Undertakings;
    3. equity held by a person, having special technical qualification and

experience, appointed as a Director in a small scale industrial undertaking, to the extent of qualification shares, if so provided in the Articles of Association, shall not be counted in computing the equity held by other industrial undertaking or undertakings even if the person concerned is a Director in other industrial undertaking or undertakings;

  1. where an industrial undertaking is a subsidiary of, or is owned or controlled by, any other industrial undertaking or undertakings in terms of sub-clauses(i); (ii); or (iii) and if the total investment in fixed assets in plant and machinery of the first mentioned industrial undertaking and the other industrial undertaking or undertakings clubbed together exceeds the limit of investment specified in paragraphs (1) or (2) of this notification as the case may be none of these industrial undertakings shall be considered to be a small scale or ancillary industrial undertaking.
  1. Policy regarding grant of SSI registration to units promoted by other industrial undertaking including Non Resident Indian (NRI) and Foreign Companies in India.

It should be understood that industrial undertaking is different from its form of ownership. The forms of ownership as stated in the notification are of three types viz. Proprietory, Partnership and company.

The provisions of "controlled" and "clubbing" will apply only to similar forms of ownership of industrial undertakings, e.g. an industrial undertaking owned by a proprietory concern cannot be clubbed with one owned as a company or an industrial undertaking owned by a partnership firm cannot be clubbed with an industrial undertaking owned as a proprietory concern irrespective of the concerned persons (Proprietor, Partner or equity holder) being common. In other words, in the above examples the provisions of "controlled" and "clubbing" will not apply.

    1. A company will be considered as having set up an industrial undertaking only if it has an equity interest (i.e. invested in equity) in an industrial undertaking. In other words, a company with no equity interest in any industrial undertaking can invest in a small scale unit without such equity being counted as equity by other industrial undertaking, Thus, in the first instance, such a company can invest every more than 24% equity in a small scale industrial unit. However, no sooner the company acquires an equity interest on an industrial undertaking it becomes a company that has set up an industrial undertaking. Therefore, in the second or subsequent instances the equity investment by such a company shall count towards equity by other Industrial undertaking and the provisions of clubbing will apply.
    2. Similarly, a NRI can invest in the first instance in a small scale industrial unit without such equity being counted as equity by other industrial undertaking. Thus, in the first instance the equity investment can be more than 24%, even 100%. However, in the second or subsequent instances, the provisions of "clubbing" will start to apply.
    3. Similarly, a foreign company with no equity interest in an industrial undertaking, whether in India or abroad, can, in the first instance, invest equity of any amount in a small scale industrial undertaking. However, in the subsequent instances, the provisions of "clubbing" will apply because such a company would, after the first investment, be considered as having set up an industrial undertaking.

CHAPTER 4

TYPES OF SSI REGISTRATION

Provisional SSI registration:

After deciding on the product and preparing the project report, entrepreneurs should obtain a Provisional SSI Registration Certificate. Provisional Certificate is valid for a period of five years.

Provisional SSI Registration enables entrepreneurs to

  • Apply for allotment of shed in industrial estates or plot in industrial area.
  • Apply for power connection.
  • Apply for local body clearances/licences.
  • Apply for financial assistances from Banks and financial institutions.

Before applying for registration, decisions must be clearly made on ownership (Proprietor/Partnership limited company, etc.,)location and product to be manufactured.

Documents to be enclosed to obtain Provisional SSI registration.

Copies of

  1. Partnership deed/ Memorandum and articles of association.
  2. List of proposed machinery with value

Permanent SSI registration

After establishment of industry and commencement of regular production the SSI unit should apply for Permanent SSI Registration

Permanent SSI Registration enable entrepreneurs to

  • Apply for incentives and concessions available from state/Central Government.

Allotment of telephone connection on priority basis

- Participate in Government Stores Purchase Programme.

Documents to be enclosed to obtain Permanent SSI registration.

Copies of

  1. Partnership deed/ Memorandum and articles of association.
  2. Proof of ownership of land /building in case of own building.
  3. Lease agreement for the minimum period of five year in case of rental factory building
  4. list of plant and machinery items installed with original purchase value(Copy of invoices/bills to be enclosed)
  5. Raw materials purchase invoices
  6. First sales invoice.
  7. TNGST / CST Registrations if applicable.
  8. Electricity meter card
  9. Provisional SSI Registration certificate in original if obtained..

Note: Any change in the address, activity, constitution etc should be intimated to the issuing authority and should be got endorsed in the Permanent SSI registration Certificate. While issuing provisional SSI Certificate to proposed SSI units, a list of incentives available to SSI units in each District should be enclosed along with the Provisional SSI Certificate.

Permanent SSI registration and issue of Provisional Eligibility Certificate :

The General Managers should arrive at the eligibility of incentives like State/Special Capital Subsidy/LTPT subsidy/Generator subsidy, IFST Waiver/Deferral etc., tentatively while processing the application for Permanent SSI Registration itself and issue a provisional eligibility certificate of incentives eligible to the unit along with the Permanent SSI Registration Certificate.

Endorsement of Expansion/ Diversification in the PMT/SSI Certificate:

Whenever a SSI unit undergoes expansion/ diversification, the value of plant and machinery items created by the unit under expansion should be endorsed in the Permanent SSI Registration Certificate and necessary entries should be made in the Code registers. The General Manager should ensure that the unit’s plant and machinery value continues to fall within the SSI upper limit (Rs. 100 Lakhs) even after expansion by adding the value of the existing plant and machinery of the unit along with the value of plant and machinery installed under expansion programme.

Date of commencement of production:

The date of commencement of production is an important criterion to decide on the eligibility of a unit for subsidy and other incentives. Hence the date of commencement of production of a new unit as well as that of a unit undergoing Expansion/diversification should be invariably incorporated in the Permanent SSI Certificate.

It should be the responsibility of the Field Officers to ascertain the exact date of commencement of production of the unit at the time of inspection itself and certify it for incorporation in the PMT SSI Registration Certificate. The date of trial production or the date on which first sale has been effected will not be considered as the date of commencement of production.

Registration of Branch units with Main unit located in other District:

The inclusion of branch units in the SSI Registration Certificate must be done only on the specific report of the General Manager in whose jurisdiction the branch units are located and the inclusion must be done in the main SSI Registration Certificate issued by the concerned General Manager in whose jurisdiction the Main unit is located.

Registration of Branch units with Main unit located in other State:

Separate Registration may be granted in respect of Branch units located in TamilNadu, the main units of which are functioning in a different State/s. However the total investment in Plant and Machinery should not exceed the ceiling prescribed for Small Scale Industries.

Carry on Business (COB) Licence

A COB licence is required when a small scale unit exceeds the prescribed small scale limit of investment in plant and machinery by way of natural growth and continues to manufacture small scale reserved item(s). The application for COB licence should be submitted in prescribed form `EE' to the Secretariat for Industrial Assistance, Department of Industrial Policy and Promotion, Ministry of Industry, Government of India along with a crossed demand draft of Rs.2500/- drawn in favour of the pay and Accounts Officer, Department of Industrial Development, Ministry of Industry, Government of India payable at the State Bank of India, Nirman Bhawan, New Delhi.

CHAPTER 5

PROCESSING OF INCENTIVE APPLICATIONS
  Competent Authority to sanction incentives to industrial projects:
  i) Projects assisted by TIIC

ii) Projects assisted by SIPCOT (including SSI)

iii) Small and Tiny projects not assisted by TIIC & SIPCOT (including self financed units)

iv) Medium and Major industry not assisted by TIIC (including self finance)

v) Industries assisted by both TIIC and SIPCOT

  

 

 TIIC

SIPCOT

DIC

SIPCOT

SIPCOT or TIIC depending on the higher quantum of loan
 
  1. Due to enhancement of SSI limit from Rs. 60.00 lakhs to Rs. 100 Lakhs, incentives to Industrial units with Plant and Machinery value up to Rs. 100 Lakhs will be now sanctioned by District Industries Centres (in cases of units not assisted by SIPCOT/TIIC). However NOC from SIPCOT may be obtained before sanctioning subsidy to such units.
  2. SSI units located in Backward areas, graduating into Medium/Major industries are eligible for the incentives as per existing orders and applications from such industrial units for sanction of incentives should be dealt by SIPCOT.
  3. TIIC will process IFST/Subsidy application of units which have been originally financed by TIIC and who undertake expansion/ diversification later out of their own funds.
 

Date of taking effective steps

Date of taking effective steps to set-up an industrial unit is an important criterion to determine the eligibility of incentives to that unit . For this purpose the following norms have been prescribed to decide the date of taking effective steps of a unit.
 

Self financed unit:

Date of acquisition of Land

OR

Date of commencement of Building construction

OR

Date of placement of order for Machinery.

Bank financed unit:

Date of financial tie-up with the Bank

Units located in erstwhile backward/ Most backward Taluks and if they had taken anyone of the above effective steps prior to 17.03.96 are eligible to avail State Capital Subsidy, provided they commence commercial production on or before 17.9.97
 

Time limit for submission of incentive applications

The following outer time limits have been prescribed for filing of applications for various incentives with the respective implementing agencies.
 
  1. Subsidy/IFST

    2.  
  2. LTPT subsidy

    3.  

     
  3. Generator subsidy

    4.  

Within 1 year from the Date of commencement of production.

Within 3 months from the Date of commencement of production or date of power connection whichever is later.

Within 1 year from the date of purchase of Generator or installation of the Generator whichever is later.
 
  • Special Capital Subsidy for solar

    • & other non-conventional energy

    devices

  • Special Capital Subsidy for

    • Effluent Treatment Plants

Within 1 year from the date of purchase or installation of the devices whichever is later.

 

Within 1 year from the date of completion of installation of the Plant.

 
 

Note: If the last date of submission of subsidy application happens to be a holiday, the unit may be permitted to file the application to the General Manager concerned on the next working day.
 

Time limit for re- submission of incentive applications

Government have not specified any time limit for the re-submission of incentive applications, which have been originally submitted within the prescribed time limit, but subsequently returned by the General Managers calling for additional particulars. Such applications could be processed taking into account of the date of filing the application originally. However the seniority will be maintained as per date of re-submission of application.
  Expansion/Diversification - Definition

Project for expansion/diversification should envisage a minimum 15% increase in turnover over and above the existing turnover.
 

Subsidy to non-manufacturing industries / Small Service Establishments

The distinction between manufacturing and non-manufacturing industries for the purpose of eligibility of subsidy is removed. All registered SSI units set up in the backward areas are eligible for subsidy with effect from 17.4.90.

Small Scale Service and Business Establishments (SSSBE) are not eligible for subsidy .
 

Processing of application in respect of branch unit located in other District

Procedure followed for the issue of SSI Registration Certificate to the branch units may be followed in respect of processing of application for sanction of subsidy etc., of the branch unit located in another District.
 

Processing of application in respect of Main unit located in other State

Industrial units set up for the first time by existing companies having manufacturing units in other states have to be treated as new units for the purpose of incentives/concessions. subject to the condition that the total investment in Plant and

Machinery of all the units taken together should not exceed the ceiling prescribed for Small Scale Industries subject to the condition that the total investment in Plant and Machinery of all the units taken together should not exceed the ceiling prescribed for Small Scale Industries
  Sanction of subsidy in stage-by-stage basis

State Capital Subsidy will be released on a stage-by-stage basis by adopting the following procedure.

I Stage : 25% -after completion of civil works.

II Stage: 50% -after installation of Plant and Machinery

III Stage: 25% -after commencement of commercial production.
 

Release of subsidy

Subsidy to Bank assisted units should be released only through the Bank, which extended Term Loan to the unit .In respect of self financed units subsidy can be directly disbursed to the units.
 

Obligations to be fulfilled by subsidy assisted units

  • Subsidy assisted units shall not change the location of the whole or part of the industrial unit or effect any contraction or disposal of substantial part of its total fixed capital investment within a period of 5 years from date of commencement of production ,without obtaining prior written permission of Director of Industries and Commerce.
  • The subsidy will have to be refunded by the unit if the unit goes out of production within 5 years from the date of commencement of production.
  • The subsidy will also have to be refunded if it is found that subsidy have been obtained by misrepresentation as to an essential factor by furnishing false information.

CHAPTER 6

COMPUTATION OF FIXED ASSETS ELIGIBLE FOR INCENTIVES

Fixed assets - definition:

Fixed assets for the purpose of grant of incentives shall mean the total investment made on Land , Building, Plant and Machinery only. Items of Machinery, which are considered for evaluating the status of SSI, will alone be considered eligible for incentives.

Items of fixed assets that do not qualify for incentives:

  1. Machinery and other assets which do not qualify for deciding the status of SSI
  2. Transport vehicles and Goods carrier
  3. Preliminary and preoperative expenses - Margin money for working capital
  4. Assets acquired through hire purchase schemes.

    5. (Except for women entrepreneurs who start industry in SIDCO Estates)

  5. Second hand Machinery items (Except imported second hand Machinery items )

Assets purchased under Deferred Payment Guarantee (DPG) scheme of SIDBI:

Assets purchased under Deferred Payment Guarantee (DPG) scheme of SIDBI shall qualify for subsidy provided the amount of subsidy sanctioned shall be paid only to the bankers/SIDBI as the case may be.

 

Leased assets:

The following assets held by an Entrepreneur in SSI sector are considered eligible for incentives subject to the condition that the period of lease is for a minimum period of 20 years

  1. Where Land and /or Building are held on premium lease arrangement, premium paid by the leaseholder on the date of application.

b) Building/ Work shed constructed on lease Land
No Objection Certificate from Industrial Estate Authorities:

The assets created by units functioning in leased Land/Shed located in SIDCO/SIPCOT or other Government sponsored Industrial Estates will be considered for incentives only if the unit produces No Objection Certificate from the Estate Authorities.

Eligibility of a new unit set-up by an existing Entrepreneur or an industrial Group for the first time in Backward area

Every new unit set up by an existing Entrepreneur or industrial group set up for the first time in a declared Backward area is eligible for capital subsidy with reference to the incremental capital investment for that new unit set up in the Backward area

Units set-up in TamilNadu with Main unit located outside the State:

Industrial units set-up in TamilNadu for the first time by existing companies having manufacturing units in other states shall be treated as new units for the purpose of incentives /concessions, subject to the condition that the total investment in Plant and Machinery of all the units taken together should not exceed the ceiling prescribed for Small Scale Industries.

PMRY,THADCO,IRDP beneficiary units

The beneficiaries under PMRY ,THADCO,IRDP and other Govt. sponsored scheme are not eligible for State/Special Capital subsidy.

Eligibility of Assets created after date of commencement of production

All Plant and Machinery, Land and Building etc., available on the date of commencement of production only are eligible for incentives. All Plant and Machinery purchased after date of commencement of production or Land and Building purchased/constructed after date of commencement of production shall be treated only as expansion.

CHAPTER 7

VALUATION OF LAND

Extent of Land area to be considered for subsidy:

Only the actual extent of land utilised by a unit for industrial purpose should be considered eligible for incentives, which includes the following constructed building area and storage premises.

  1. Administrative building (office)
  2. Factory sheds including
    1. Raw material and finished products godowns
    2. Cold storage
    3. Laboratory room
    4. Boiler shed
    5. Power/Transformer room
    6. Generator shed
    7. workshop/Maintenance shed
    8. Cooling Tower
    9. Cooling water ponds
    10. Overhead tank, bore wells, pump house and sump
    11. Chimney
    12. Drying yard
    13. Toilet
    14. Machinery foundation

However in cases of Land allotted in SIDCO/SIPCOT or other Government sponsored Industrial Estate the total cost paid for the full extent of Land will be considered.

Items to be excluded:

  1. Land development charges including development of roads etc.,
  2. Stamp duty and Registration charges
  3. Cost of service charges, E.M.D paid to SIDCO.
Land owned by proprietor of the unit:

In case of proprietary concerns cost of the Land purchased either in the name of the unit or in the name of the Proprietor are considered eligible for incentives.
Land owned by one of the partners of the unit:

Land owned by one of the Partners of a Partnership unit ,in which Building is constructed by the unit may be considered eligible for incentives provided the Land has been brought into the share capital as his contribution and the same should be incorporated in the Partnership deed.

Leased land:

Value of Land held on lease will not be considered eligible for subsidy. However Where Land and/or Building are held on premium lease arrangements from Government agencies like SIDCO, SIPCOT, CMDA etc., premium paid by the leaseholder on the date of subsidy application shall be considered eligible for grant of subsidy.

CHAPTER 8

VALUATION OF BUILDING

Items to be considered under Building:

Only civil structures essentially related to production process shall be considered eligible for incentives. The following items of civil works are considered eligible for subsidy.

  1. Administrative building (office)
  2. Factory sheds including
    1. Raw material and finished products godowns
    2. Cold storage
    3. Laboratory room
    4. Boiler shed
    5. Power/Transformer room
    6. Generator shed
    7. workshop/Maintenance shed
    8. Cooling Tower
    9. Cooling water ponds
    10. Overhead tank, bore wells, pump house and sump
    11. Chimney
    12. Drying yard
    13. Toilet
    14. Machinery foundation

Items not to be considered under Building:

The following items of Civil works are not considered eligible for subsidy

  1. staff quarters
  2. canteen
  3. rest house
  4. Guest House
  5. Cycle/vehicle stand
  6. Compound wall
  7. Fencing/gate
  8. Portico/veranda
  9. Security/time office

Plan Approval from Local bodies:

Only structures constructed as per approved plans of the local body concerned will be considered eligible for incentives. However in respect of units located in SIDCO or other Government sponsored Industrial Estates approval of the Estate Authorities is enough.

Valuation Certificate from Chartered Civil Engineer:

In the subsidy / IFST application there is only provision for giving abstract value of the item of civil structures constructed by the unit. Detailed valuation in respect of each item giving details of size, type of structure (whether R.C.C. or load bearing structure etc.) With detailed estimate especially in respect of items of special nature for which standard norms are not available for assessing the cost of structure (e.g. machinery foundation, chimney, boiling tank, drying yard etc.) should be obtained from the Chartered Civil Engineer.

Building constructed on Land owned by one of the partners:

Building constructed on Land owned by one of the partners of a Partnership concern can be considered for incentives provided the Land has been brought in to the share capital as his contribution and the same should be incorporated in the Partnership deed.

Building constructed on leased Land:

Building constructed on leased Land will be considered for subsidy subject to furnishing of registered lease deed for a minimum period of 20 years.

Date of commencement and completion of building construction:

Date of commencement and completion of building construction has to be certified by the Chartered Civil Engineer, as the date of commencement of the building construction is envisaged as one of the parameters to decide the eligibility of subsidy in case of self-financing units.

Adoption of TIIC Norms for assessing the Building value

The norms prescribed by TamilNadu Industrial Investment Corporation Ltd should be followed for arriving at the cost of building for sanction of subsidy. However in cases of sheds allotted by SIDCO/Government agencies the total value specified will be taken for computation purpose.

CHAPTER 9

PLANT AND MACHINERY

 

Items that are to be considered for subsidy

All items that have been taken into account for deciding the SSI status of an

Industrial unit.

Items that are not to be considered for subsidy

  1. All items that are not been taken into account for deciding the SSI status of an industrial unit.
  2. Electrical installation,
  3. Erection and Transportation of machinery items
  4. Consumable stores
  5. Spares
  6. Transport vehicles/Goods carrier

Fabricated machinery:

Plant and machinery items fabricated by the unit on their own are eligible for subsidy subject to certification of expenditure incurred by Chartered Accountant and valuation of item by Chartered (Mechanical) Engineer. As these fabrication works are carried out on job work basis sales tax Registration need not be insisted in such cases.

Hire purchase machinery:

Assets acquired through hire purchase are not normally considered eligible for subsidy. However if the Hire-purchase amount is fully settled and the assets are fully owned by the unit at the time of filing of subsidy application then those assets can be considered eligible for subsidy.

Second hand machinery:

Second hand Machinery items should not be considered eligible for incentives. However Imported second hand Machinery brought into use within the Country for the first time is eligible for Subsidy subject to certification by a Chartered Engineer of its value and its residuary life and provided the certified residuary life is not less than 5 years.

Second hand imported Machinery is not eligible for Interest Free Sales Tax scheme.

Proof of payment:

Only bills with stamped receipt will be accepted as proof of payment. Stamped invoice cannot be accepted as a receipt. However Cash bill with signed stamp can be accepted.

In case of payment made through Bank/Financial institutions a Certificate in original furnished by the Bank in proof of payment made to the Machinery suppliers may be accepted as an alternative to stamp receipts. In case of payment made through Demand Drafts/cheques simple receipt is enough.
Sales tax registration:

Only machinery items purchased from machinery suppliers with Sales tax registration will be accepted.

CHAPTER 10

STATE CAPITAL SUBSIDY

Quantum of subsidy

i) Backward area

15 % of the Fixed capital Investment subject to a ceiling of Rs. 15 lakhs

ii) Most Backward area

20 % of the Fixed capital Investment subject to a ceiling of Rs. 20 lakhs (with effect from 19.9.91)

Overall ceiling on subsidy

The overall ceiling on subsidy should be applied not for the original project and expansion/diversification taken together but should be applied separately for the original project and the expansion /diversification

Eligible Units

All new registered SSI units set up on or after 22.5.89 including substantial expansion /diversification of existing units in specified areas

Ineligible Units

a) Conventional and resource based Industries

1. Cement

2. Sugar

3. Textiles (including Spinning and Knitting)

4. Mining and Quarrying

5. Flour Mills

6. Hotels

7. Edible oil and Solvent Extraction units

8. Rice Mills

9. Distilleries, Brewery and Malt Extraction.

b) Power intensive units

1. Iron and Steel Smelting

2. Aluminium Smelting

3. Calcium Carbide

c) Small Service Business Establishments (SSSBE).

Eligible areas

Most Backward Areas
  • 71 most backward Blocks
  • SIPCOT Industrial Complexes at Pudukottai, Manamadurai, Tuticorin
  • SIDCO Industrial Estate at SIPCOT complex Tuticorin
  • Dr. Vikram Sarabhai Instronic Estate at Thiruvanmiyur and Electronic City at Sholinganallur
  • Perungudi Industrial Estate.

 

Backward Areas
  • 216 backward Blocks
  • SIPCOT Industrial Complexes at Cuddalore, Gummidipoondi, Hosur and Ranipet
  • Industrial Complexes developed by Government Agencies including SIDCO, CMDA, etc.

10.7

Release of subsidy on stage by stage basis

State Capital Subsidy for SSI units will be released on a stage-by-stage basis without waiting for full completion, even as the work on the new unit is in progress in order to bring down the capital cost for the Entrepreneur.

 

CHAPTER 11

SPECIAL CAPITAL SUBSIDY

Eligible Industries

All new registered SSI units set up anywhere in the State on or after 22.5.89 including substantial expansion /diversification of existing units in the following sectors.

Thrust Sectors

1. Electronics

2. Leather

Select Sectors

  1. Auto spare part

2. Drugs & Pharmaceuticals

3. Food Processing

4. Solar energy equipment

5. Gold & Diamond Jewellery for Export

6. Jute processing industry in

Ambasamudram

Chengalpattu

Kumbakonam

Madurai

Musiri and

Panruti Taluks only

  1. Pollution Control Equipments
  2. Sports Goods & Accessories
  3. Cost effective building materials

Quantum of subsidy

20 % of the Fixed capital Investment subject to a ceiling of

i) Rs. 20 lakhs for Electronic and Leather Industries

ii) Rs.15 lakhs for other Industries

 

 

Items classified under Food processing Industry

The following 7 industries are classified as Food Processing industries for the purpose sanction of Special Capital Subsidy.

  1. Cereal and pulse products including instant mixes.
  2. Meat and Fish processing
  3. Fruit and Vegetable processing industry
  4. Nut and oilseed processing industry
  5. Protein foods
  6. Starch derivatives and
  7. Spice Products
  8. Iodised Salt
  9. Bread & Biscuits

11.4

List of Items not eligible for subsidy under Food processing Industry
 

 

Category

 

Item not eligible
 

Cereal and pulse products including instant mixes

rice mill

Flour mill (including roller flour mill)

Dhal mill

 
 

Meat and Fish processing

Prawn farming

slaughter house

 

 
 

Fruit and Vegetable processing industry

Pickles & chutneys

(other than mechanised process)

Processing of fruit for breweries

Tea processing

 
 

Nut and oilseed processing industry

All edible oil processing units

Coffee roasting and grinding

Chicory roasting and grinding

 
 

Protein foods

 Milk processing including milk powder

Chocolates, toffees, sweets and confectionery items

 

 
 

Starch derivatives

other than that used for food industry

 

 

 
 

Spice Products

other than that used for food industry

 

CHAPTER 12

SUBSIDY TO SOLAR AND OTHER RENEWABLE ENERGY EQUIPMENTS

Items eligible for subsidy

The following 18 items are eligible for availing subsidy for solar and other renewable energy equipment.

  1. Flat -plate solar collectors
  2. Concentrating and pipe type solar collectors
  3. Solar water heaters and systems
  4. Air/gas/fluid heating systems.
  5. Solar crop dryers and systems
  6. Solar stills and desalination systems
  7. Solar pumps based on solar thermal and solar photo-voltaic conversion
  8. Solar power generating systems
  9. Solar photo-voltaic modules and panels for water pumping and other applications
  10. Wind mills and any specially designed devices, which run on windmills.
  11. Any special devices including Electrical Generators and pumps running on wind energy
  12. Bio-gas Plants and Bio-gas engines
  13. Agricultural and Municipal waste conversion devices producing energy
  14. Equipment for utilising ocean waves and thermal energy
  15. Solar cookers
  16. Solar energy equipments
  17. Solar refrigerators, solar cold storage air conditioning systems
  18. Electrically operated vehicles including battery powered or fuel cell powered vehicles.

Quantum of subsidy in SSI sector

Manufacturers

20 % of the value of fixed assets limited to Rs. 15 lakhs.

Users

10 % of the cost of the equipment upto a ceiling of Rs. 10 lakhs
Withdrawal of Subsidy to Wind Mills

Subsidy for manufacturers and users of Windmills has been stopped with effect from 17.3.97.

However Windmills which have been commissioned before 17.3.97 may be considered for sanction and disbursement of subsidy.

Special Capital Subsidy to Common effluent Treatment Plant

Tanneries who set up Effluent Treatment Plant are eligible for Special Capital Subsidy of 10 % of the value of fixed assets subject to a maximum of Rs. 2.00 Lakhs.

A Certificate from the TNPCB authorities duly indicating that the Effluent Treatment Plant installed by the unit is a new one and also it is installed in the unit for industrial application and satisfies the conditions of the Pollution Control Board’s norms has to be obtained from the unit.

CHAPTER 13

ADDITIONAL CAPITAL SUBSIDY FOR EMPLOYING WOMEN WORKERS

Quantum of subsidy

New industrial units which employ women workers more than 30% of their total workers are eligible for additional capital subsidy of 5% of investment on fixed assets subject to a maximum Rs. 5 lakhs

Ineligible industries

  1. Food processing
  2. Garment
  3. Leather goods
  4. Hosiery
  5. Match

Operational guidelines

  1. New units, which have commenced production on or after 19.9.91 alone, will be eligible for the subsidy.
  2. Only regular workers will be taken into account and not casual, temporary or contract.
  3. The beneficiary unit shall furnish a Certificate either from the Labour Department or from the Inspector of Factories every 6 months till completion of 5 years from the date of availing the subsidy as to continuity of the employment of more than 30% of women workers out of the total number of workers etc.,
  4. Such units should be inspected atleast once in 6 months to ensure that more than 30% strength of women in the work force is maintained.

CHAPTER 14

LOW TENSION POWER TARIFF SUBSIDY

 

Quantum of subsidy

Available for 3 years from the date of commencement of production or date of power connection whichever is later at the rate of

  • 40 % of the actual energy charges for the first year
  • 30% for the second year and
  • 20% for the third year

(with effect from 20.1.92)

 

Eligible Units

All registered SSI units, which commenced production on or after 1.1.1980 and which consume Low Tension Power.

All industries using L.T. power irrespective of the fact that whether the industry happens to be Small, Medium or Large are also eligible for subsidy, with effect from 1.4.88.

Registered SSI units taking up substantial expansion/diversification also be eligible for subsidy with effect from 20.1.92

Eligible areas

All over the State excluding the areas

1.Areas falling under the CMDA/urban Land Tax / Urban Land Ceiling jurisdictions viz. Chennai and its environs of 15 Kms and towns of Coimbatore, Madurai, Salem and Tiruchirapalli with a 8 Km belt area.

2. 21 Special Grade and Selection Grade Municipalities and 2 Townships with effect from 1.7.91.

Eligibility for units commenced production with other means of energy

Units which have started production before availing power supply with other means of energy like Generator /Diesel engine etc., will be eligible for LTPT subsidy either from the date of commencement of production or from the date of availing power supply whichever is later.

Time limit for obtaining Eligibility Certificate

Eligibility Certificate should be obtained from the General Manager, District Industries Centre concerned within 3 months from the Date of commencement of production or date of power connection whichever is later.

Time limit for submission of subsidy claims

The first claim for subsidy should be preferred within 30 days from the date of issue of Eligibility Certificate. Subsequent claims should be preferred by the units once in 6 months i.e. the bills raised by TNEB from January to June should be preferred before August 31st of the year and from July to December before 28th of February of the succeeding year.
Units set up in rental Building
  1. LTPT subsidy may be granted to SSI units set up in rental Building provided that the power connection was obtained for that purpose by the Landlord and the lessee/SSI unit executes a lease agreement for the power connection for a period of not less than 3 years and such lease agreement should be in operation during the eligibility period of Low Tension Power Tariff subsidy.
  2. SSI units occupying a portion of another unit consuming power jointly are not eligible for Low Tension Power Tariff subsidy.
Power charges eligible for subsidy

The actual energy charges inclusive of surcharge and other charges but exclusive of penalty is eligible for subsidy.

Units using power for the manufacturing are eligible subsidy for the lighting charges for the factory premises, since the light is essentially required for proper and careful operation of machinery and to have safe working environment.
Direct issue of Eligibility Certificate

Eligibility Certificate for Low Tension Power Tariff subsidy may be issued directly to SSI units when they satisfy the following conditions.

  1. When the unit applies for permanent SSI registration within 3 months from the Date of commencement of production.
  2. When the unit is in possession of power connection during the above period in the unit’s name of the Proprietor /Partner.
Verification of existence of the unit at the time of disbursement

General Managers should verify as to whether the SSI units are in existence with same constitution etc, before disbursement.

CHAPTER 15

GENERATOR SUBSIDY

 

Quantum of subsidy

15 % of the cost of Generator set, subject to a maximum of Rs. 5 lakhs.

Terms and conditions

  1. Subsidy will be available only for brand new equipment.
  2. Permission of the TNEB should be obtained for the installation of new Generator sets.
  3. Generator should be purchased from the manufacturer or Dealer accredited by the manufacturer

Eligible Units

All HT/ LT power consuming units, which have installed Generator, set for their captive use on or after 22.5.89 anywhere in the State.

Ineligible Units

Conventional and resource based Industries

  1. Cement
  2. Sugar
  3. Textiles
  4. Mining / Quarrying
  5. Flour Mills
  6. Hotels
  7. Edible oil and Solvent Extraction
  8. Rice Mills
  9. Distilleries, Brewery and Malt Extraction
  10. Granite polishing units (connected with Mining and Quarrying)
  11. Textile processing, crimping, Texturising etc. connected with Textile Industry.
  12. Ceramic manufacturing

b) Power intensive units

  1. Steel and Aluminium industries for a demand exceeding 2000 KVA

Units consuming more than 2000 units per Tonne of finished product. (viz. Newsprint, caustic Soda, Fertiliser, Nylon/Rayon/ Polyester fibre, Potassium Chlorate)

Eligibility of accessories for subsidy

All accessories required for erection and functioning of the Generator set can be treated as one unit for the purpose of calculation of Generator subsidy.

However loading, unloading and erection charges are not to be considered for subsidy.
Time limit for submission of subsidy application

Application for Generator subsidy should be filed before the General Manager District Industries Centres within 1 year from the purchase of Generator or installation of the Generator set whichever is later.

Date of installation of Generator set

The date of installation of a Generator set has to be reckoned from the date of installation permission by TNEB and not from the date of physical installation of the Generator set in the factory premises

Replacement of old Generator set by new one

New Generator purchased for replacement of old Generator is also eligible for subsidy. However subsidy should be limited to the proportionate cost of the excess capacity of the new Generator set over and above the old Generator set.

CHAPTER 16

SALES TAX WAIVER /DEFERRAL SCHEMES

I.SALES TAX WAIVER

Eligible units

New units and existing units undertaking expansion/diversification in declared Most Backward areas.

Quantum of Assistance

Full waiver of sales Tax for a period of 5 years upto a ceiling of total investment in fixed assets made in new units and existing units undertaking Expansion/diversification with the ceiling for waiver upto the total investment in fixed assets made in such expansion/diversification.

II.SALES TAX DEFERRAL

Eligible units

New units and existing units undertaking expansion/diversification in declared Backward areas and other areas

 

 

Quantum of Assistance

New units

Expansion/

Diversification
Most Backward area

9 years Deferral on the total investment in fixed assets

Backward area

9 years Deferral on the total investment in fixed assets

Other area

5 years Deferral on 60% of the investment in fixed assets

 Most Backward area

9 years Deferral on the total investment in fixed assets under expansion

Backward area

9 years Deferral on 80% of the investment in fixed assets under expansion

Other area

5 years Deferral on 50% of the investment in fixed assets under expansion

Note: Units setup in Most Backward areas can opt for either Sales Tax Waiver or

Deferral Scheme whichever is advantageous to them.

Eligibility of conventional and power intensive Industries

All types of Industries including conventional and power intensive units are eligible for IFST Deferral/Waiver assistance.

Building constructed on lease Land

Building (owned one) constructed on leased Land is eligible for IFST Deferral/Waiver assistance provided the lease period is for a minimum period of 20 years

Fixed assets acquired on Lease or Hire purchase

Fixed assets acquired on lease or Hire purchase will not qualify under IFST Deferral/Waiver scheme

Reschedulement of eligibility period

If by the time the Eligibility Certificate is issued the Entrepreneurs have already paid the Sales Tax for the period included in the Eligibility Certificates then the period of eligibility for IFST Deferral/Waiver may be suitably rescheduled by the implementing agencies.
  •  

Eligibility of second hand Machinery

Second hand Machinery including imported second hand Machinery should not be considered eligible for IFST Waiver/Deferral assistance.

However the value of Land and Building can be considered eligible for IFST assistance in respect of SSI units who have erected second hand Machinery.

Purchase tax not eligible for IFST

Tax on purchase of raw materials is not eligible for IFST Deferral/ Waiver assistance.

Eligibility of activities involving jobworks /activities not considered manufacture under sales tax laws

Industries will be eligible for IFST Waiver/Deferral primarily on the value addition done within the premises (out of the capital assets created in the premises) but there may cases where the value addition to a small extent is done outside (e.g. Electroplating, Polishing etc.,) Such cases are still eligible for IFST Waiver/Deferral on the final finished product.

Deferral/Waiver of Sales Tax is based on the fixed assets created irrespective of the fact whether such assets will involve manufacture in terms of Sales Tax laws. (E.g. sawing of timber, conversion of gram into dhall and ginning of cotton)

The offer as grant of any new incentive based on sales tax for industries has been discontinued in TamilNadu with effect from 23.1.2000. The existing commitments made in respect of industries which have already come in, will be continued. for the period of their eligibility and the industries in the pipeline will be entitled for incentive if such units fulfil the following conditions.

a) the unit should be registered with an industrial agency of the State/Central Government.

b) land should have been allotted or purchased for the factory.

c) the industry should have applied for finances from a regular financial institution and

d) the industry should start production within 2 years from the date of G.O. viz.23.1.2000 (G.O. (Ms) No.12, Commercial Taxes dated 23.1.2000)

The sales tax based incentives will be available to the existing industrial units undertaking expansions/diversifications provided that such units have acquired necessary plant and machinery on or before 23.1.2000 and commenced production under such expansions/diversifications on or before 22.1.2001 (G.O.Ms.No.26, Commercial Taxes dated 7.2.2000).

CHAPTER 17

SINGLE WINDOW CLERARANCE SCHEME

An entrepreneur who wants to set up a Small scale industrial unit has to obtain a number of licences and clearances from various Government Departments and Agencies like local bodies, Inspector of Factories, Town and Country Planning Department, Public Health Department, Fire, Pollution Control Board, Electricity Board etc., which are pre-requisite for starting Industrial units under various Acts and Rules of the Government which are in force from time to time.

Under the present set-up an entrepreneur has to file their application separately to each Department in the application format prescribed by respective Departments. As this is a cumbersome and time consuming process a common application form has been designed so that the Entrepreneur can send his application in a common format to all Departments.

The new application will be made available to Entrepreneurs through District Industries Centres. The General Managers of District Industries Centres, will be the nodal officer for getting clearance from various Government Departments under Single Window Clearance scheme. He will collect the application from the Entrepreneurs and forward them to various Departments and watch the progress of issue of various Licence /clearances on time. Any delay in the issue of Licence /clearances will be brought for discussion in the Single Window Clearance Committee.

CHAPTER 18

OTHER BENEFITS TO SSI

The SSI units in the State were also provided with the following benefits by Government Departments/Public Sector Undertakings/Boards/Cooperatives/Local Bodies:

1. Orders have to be issued for the exclusive procurement of reserved item from SSI units by the Government Departments etc. vide G.O. (Ms) 195 Finance (BPE) dated 4.5.98.

2. SSI units have been exempted from payment of SD/EMD and tender documents are issued at free of cost (G.O. Ms. No. 387 Finance (BPE) Department dated 3.8.98).

This order issues with the concurrence of Finance Department vide its U.O. No.361/FS/2000 dt. 7.3.2000.

(BY ORDER OF THE GOVERNOR)

 

O.P. SOSAMMA,

SECRETARY TO GOVERNMENT

To

The Industries Commissioner and

Director of Industries & Commerce,

Chepauk, Chennai 600 005.

The Chairman & Managing Director, SIDCO, Chennai 16.

The Chairman & Managing Director, TALCO, Chennai 12

The Managing Director, TIIC, Chennai- 35.

The Accountant General, Chennai 18,

The Accountant General, Chennai 6,

The Accountant General, Chennai 35,

Copy to the Finance Department, Chennai 9

Copy to the Industries Department, Chennai 9.

All the Sections in Small Industries Department.

 

- / Forwarded by Order / -

 

SECTION OFFICER