I T Policy

The Information Technology (IT) Industry in India is among the fastest growing segments of the Indian Industry, compounded with annual growth rate exceeding 50%. Tamil Nadu’s contribution to IT industry is significant. The key elements which have made Tamil Nadu an important place in this area are availability of skilled and educated manpower, comparatively higher standard of Educational Institutions, sound infrastructure and lower costs of operation. Apart from these, the presence of an International Airport and major seaport in Chennai have also helped the growth of IT industry in Tamil Nadu. The potential for further growth of IT industry in Tamil Nadu is enormous with IT penetrating all spheres, including Government Departments, Educational Institutions, Banking, Shopping, Entertainment and a whole gamut of other consumer applications. With the aim of achieving the goals spelt out in the IX Five Year Plan and to focus attention on the IT industry as an engine of growth in the State, it has been decided to formulate in Industry specific policy for the IT industry.

Accordingly after detailed discussions with the representatives of manufacturers Association for Information Technology (MAIT) and various Governments Departments/ Agencies, the Government are pleased to formulate and adopt an exclusive IT policy as appended to this order.

The IT policy is issued with the concurrence of CT&RE, and Finance Departments – vide their U.O. No. 26413 / B2 / 97-1, dated 21.8.97 and U.O.No.489/FS/97, dated 1.9.97 respectively.

(BY ORDER OF THE GOVERNOR)

M S SRINIVASAN

Secretary to Government

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To
The Works Manager, Government Central Press, Chennai-79. (for publication in the next issue of T.N. Government Gazette. He is also requested to print and supply 1000 copies of the IT policy to the Industries Department in book form)

The Chairman and Managing Director,
Electronics Corporation of Tamil Nadu Ltd.,
Chennai – 35.

The Chairman and Managing Director,
Tamil Nadu Industrial Development Ltd.,
Chennai-8

The Managing Director,
State Industries Promotion Corporation of Tamil Nadu (SIPCOT),
Chennai-8

The Managing Director,
Tamil Nadu Corporation for Industrial Infrastructure Development,
Chennai-6

The Director,
Industrial Guidance and Export Promotion Bureau,
Chennai-8

The Secretary to Government,
Finance Department

The Secretary to Government,
Commercial Taxes and Religious Endowment Department.

The Secretary to Government,
Energy Department

The Secretary to Government,
Environment and Forest Department.

The Secretary to Government,
Information and Tourism Department

The Secretary to Government,
Higher Education Department

The Secretary to Government,
Small Industries Department.

The Secretary to Government,
Municipal Administration and Water Supply Department.

Copy to all Departments of Secretariat.

The Industries Commissioner and Director of Industries and Commerce, Chennai-5.

The Commissioner of Commercial Taxes,, Chennai-5

The Chairman , Tamil Nadu Pollution Control Board, Chennai-32

The Chairman, Tamil Nadu Electricity Board, Chennai-2

The Officer on Special Duty, TANITEC, Chennai-35

The Chairman, Southern Region, Manufacturers’ Association for Information Technology, No.4-L, Block. I Floor, J.C. Road, Bangalore-560 002.

Industries (O.P.II) Department.

Forwarded : By Order

Section Officer.

The Information Technology Industry in India is a fast growing segment of the Indian economy, with growth rates exceeding 50% per annum. In 1995-96, the Indian Information Technology Industry comprising hardware, software, peripherals and training had a turn over of Rs. 9037.85 crores. The Hardware Industry in India has mainly catered to the needs of domestic consumers, with only marginal exports. On the other hand, 60% of Software revenues are from exports, and the main growth is in this sector.

Tamil Nadu’s contribution to the I.T. industry has been significant . The key elements which have made Tamil Nadu an important player in this area are availability of skilled and educated manpower, comparatively higher standard of educational institutions, reasonably good infrastructure, and lower costs of operation. Apart from these, the presence of an International Airport and a major Seaport in Chennai have also helped the growth of I.T. industry in Tamil Nadu. After the liberalisation process in 1991, and especially after reduction of import duties on hardware in July 1996, Multinational Companies were able to export large volumes to India, thereby boosting the domestic market for both hardware and software. Despite all these advantages, Tamil Nadu accounts for only 7% of the total revenue from hardware and software in the country. The turnover of the industry in Tamil Nadu in 1995-96 was Rs. 289 crores of which Rs. 139 crores was in hardware and Rs. 150 crores in software. The potential for growth of Information Technology in Tamil Nadu is enormous with I.T. penetrating all spheres, including Government Departments, educational institutions, Banking, shopping entertainment and a whole gamut of other consumer applications. The Industry while drawing up the programme for the IX Five Year Plan has projected that by the year 2001-2002, I.T.revenue in Tamil Nadu will be of the order of Rs. 13,000 crores (Rs. 5000 crores in Hardware and Rs. 8000 crores in Software). The industry has predicted that this level of achievement can be obtained provided the State Government announces and implements an industry-friendly I.T. policy. With the aim of achieving the goals spelt out in the IX Plan and to focus attention on the I.T. Industry as an engine of growth in the State, it has been decided to formulate an industry – specific policy for the I.T. Industry.

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There is no system of Entry Tax or Purchase Tax in
  Tamil Nadu. I.T. Industry will continue to enjoy
  facilities of unrestricted movement of capital equipment
  including hardware, peripherals, captive power gensets,
  UPS sets and Telephone Exchanges, subject only to Sales
  Tax payments as per orders in force.

Due to self sufficiency in power, Tamil Nadu does not
  have power cuts for industry. The facility of
  uninterrupted power will continue to be offered to I.T.
  industry.

Tamil Nadu has already announced fiscal and tax
  concessions for investments of various slabs starting
  from an investment of Rs. 50.00 crores (mega projects)
  upto investments exceeding Rs.1500.00 crores (super mega
  projects). The orders issued in G.O.Ms.No.43,Industries,   dated 13.12.1992 (for ‘mega’ and in G.O.Ms.No.1,
  projects) industries dated 2.1.1996 (for ‘super mega’
  projects) will be applicable for I.T. industries also in   addition to other incentives.

Capital subsidy as applicable to electronics industries
  @ 20% of fixed assets subject to a maximum of Rs. 20.00
  lakhs will be available for all I.T. industries,
  irrespective of their location in the State. Where the
  unit is also eligible for capital subsidy for backward /   most backward areas, this special subsidy will become
  part of such subsidy. The existing incentives available
  for industries employing at least 30% of women workers
  will also be available to I.T. industries.

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The State Government will set up Information
  Technology Parks (ITPs) at Chennai, Coimbatore,
  Tiruchirapalli and Madurai in a phased manner
  through ELCOT during the IX Plan period in association
  with the private sector. The ITPs will have full-fledged
  facilities with adequate modules for software
  development as well as sites for non-polluting
  hardware units, commercial and residential areas,
  schools, Convention and Business Centres as well as
  the connectivity required for communication and
  information exchange globally.

Apart from ITPs in the Government and joint sectors,
  Government will facilitate setting up of ITPs by the
  private sector in potential locations for the
  development of I.T. industries. Private ITP
  developers will be given assistance in land
  acquisition and re-zoning, wherever required,
  by State Government.State Government will also
  facilitate provision of water, power connection
  and roads. State Government will also help
  the ITP promoters in obtaining necessary cable and
  satellite links through VSNL/DOT for the necessary
  connectivity. An ITP will be treated as an "
  industry" and be eligible for backward
  area capital subsidy and ST benefits.

The Government will provide assistance to VSNL and
  Department of Telecommunications to expand communication
  links in the State and also provide the land
  and power wherever required by such agencies. State   Government will liaise with Govt. of India to
  ensure dedicated VSNL connectivity / Earth Stations
  as well as Electronic Telecom facility for each ITP.

All ITPs set up by private promoters will have the
  same status as ITPs promoted by Govt. agencies for
  the purpose of eligibility for the concessions /
  incentives granted by Government from time to time
  to SIPCOT, ELCOT, TIDCO and TACID industrial
  estates, subject to conformity to certain quality   standards, and subject to location
  (whether backward / most backward area). Units in
  private ITPs will be entitled for exemption from
  stamp duty and registration charges at the time
  of allotmentof sites / built up space as in the
  case of units in ELCOT / SIPCOT industrial estates.
  Private ITP promoters will be granted exemption of
  tax for works contracts within the complex as in
  the case of SIPCOT / ELCOT, etc. Software / hardware
  units set up in private ITPs established in
  accordance with the standards prescribed by the
  Government will enjoy the same facilities and
  incentives on par with units in Government industrial
  estates.

In all the Technology Parks set up by Government &
  Joint Ventures, there will be an Executive Authority
  of the Park which will function as the Single
  Window for all statutory clearances required for
  the units, within the Parks. In the case of private
  sector Technology Parks, ELCOT will assist in getting
  all clearances fast.

Apart from development of software and hardware
  Industry through ITPs / STPs the Government will also
  encourage software development outside the Parks
  by giving such stand-alone units the same incentives
  as the Units in the ITPs / STPs. There will be
  no locational restrictions for setting up units   exclusively engaged in software development / training.

All software industries including Services and
  Training Institutions in I.T. will be entitled to
  "Industry" status. Such units shall be
  eligible for all concessions and incentives
  applicable to Industries. For the purpose of
  this clause, accredited Training Institutions
  will also be eligible to claim industry status,
  subject to certain norms which will enable them
  to obtain Term Loans and Bank Finance at
  industry rates.

Government will provide continuous power supply in
  industry rates to all I.T. units, whether set up
  in ITPs, or in stand-alone locations, and also
  ensure quality of power as required by the industry.
  Software Training units will also be eligible
  for these facilities.

For the purpose of power tariff, maintenance and
  servicing units and hardware units will be treated
  as Industrial and not Commercial consumers and
  electricity staff as applicable to Industry
  consumers will be charged.

All software industries will be exempted from the
  purview of Tamilnadu Pollution Control Act.
  Hardware units will require clearance from Pollution
  Control Board as applicable to other industries.

Government of Tamil Nadu will also facilitate setting
  up of a T-Net with an "Information Back
  bone" connecting all District Head Quarters,
  using the Cable T.V. network all over the State
  whose penetrating at present is 4 times that of
  Telephone lines.

Government of Tamilnadu will encourage setting up of
  Venture Capital Fund for development of I.T.
  Industry through TIDCO in association with private
  sector partners.

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Government of Tamil Nadu will set up an Information   Technology Institute of Tamil Nadu (TANITEC) to take
  care of the training and technology upgradation
  aspects of I.T. in the State. The Institute will also
  co-ordinate in preparation of syllabus for I.T.
  courses in Colleges and Technical institutions,
  create Centres of Excellence in Universities,
  and also support funded research programme and
  specific technology applications.

Training Institutes for hardware, software, servicing   and maintenance will be deemed to be "Industries
  " and will be eligible for all facilities offered
  to Industries including Bank Finance and SSI or
  IEM registration.Certification for Software training
  will be governed by existing standards prescribed by
  the Department of Electronics, Government of India.
  For quality certification of training in hardware,
  servicing and maintenance ELCOT will be the Nodal
  Agency to prescribe minimum standards for eligibility.

Basic training in computers will be introduced in all   schools from the high school level. The endeavour
  will be to cover all schools within a 5-year
  period. Training of teachers will also be done
  in a phased manner over the 5-year period. In
  addition to Government sponsored training programmes,
  State Government will facilitate and co-ordinate
  with other sponsors like INTEL, IBM, APPLE, etc.,
  for training of teachers.

Government of Tamil Nadu will encourage I.T.   industries to obtain ISO 9000 process certification.
  Small Scale Industries (SSIs) will be eligible to
  claim the incentives offered by TIIC for obtaining
  such certificiation.

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Government of Tamil Nadu will offer relaxation of FSI
(Floor Space Index) in metropolitan areas to the extent
of 50% for IT. Parks.

Government of Tamil Nadu will co-ordinate with
  Government of India facilitate setting up of ‘
  Internal Container Depot’ to take care of
  exports of specified industrial products through
  Chennai Port, including products of electronic and
  hardware units.

Government of Tamil Nadu will facilitate setting up an
  Air Freight City near Chennai Airport, for improving
  the cargo movement for imports and exports from
  Chennai Airport. The Air Freight Centre will have
  sufficient space for handling equipment and necessary
  facilities for customs clearances, with staff posted
  round the clock. Such a centre will be formed as a
  Joint Venture between TIDCO, TACID, and FIEO. With
  these facilities, Government of Tamil Nadu will
  facilitate a 72-hour cycle for import of components
  and export of finished products by the hardware units.

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They will be eligible for Sales Tax deferral / waiver for 14 years. The Company can exercise its option either to avail deferral /waiver.<>

The limit of only one revision of the Eligibility Certificate as stipulated in Government Letter Ms. No. 1414, Industries (MIG-2) Department dated 14-12-1990, will not be applicable to Super Mega Projects. They are permitted a maximum of Five number of revisions of the Eligibility Certificate. The Eligibility Certificate indicates the investment made in fixed assets upto the date of its issue and represents the Eligibility Limit for availing Sales Tax Deferral / Waiver at any point of time. Once the "Investment Limit" and "Time Limit" for making the investment as specified for ‘Super Mega Project’ are reached, the Company will be eligible for the concessions indicated in subparas (iii) and (iv) below.

These companies can continue to avail sales tax deferral / waiver upto the specified period of 14 years, even if the quantum of Sales Tax Deferral / Waiver availed reaches the limit of 100% of the value of installments in fixed assets the Super Mega Project before 14 years.

If the quantum of Sales Tax Deferral / Waiver availed by these companies does not reach the limit of 100% of the investment in fixed assets for the Super Mega Projects by the end of the 14^th year, they can continue to avail Sales Tax Deferral / Waiver for a further period not exceeding 7 years or till the limit of 100% of the value of the investment in fixed assets for the Super Mega Project is reached, whichever is earlier.

The deferred sales tax will be repayable in 5 equal annual investments as follows :

Sales Tax deferred in Year 1 will be repayable in 5 equal annual instalments from Year 15 to Year 19 ; Sales Tax deferred in Year 2 will be repayable in 5 equal annual instalments from Year 16 to Year 20 and so on. The deferred amount repayable in any particular year will be paid in 4 equal quarterly instalments before the last day of each quarter.

Existing Industries taking up expansion / diversification, at their existing plant location / sites or at new sites, for which investment in fixed assets exceeds Rs.1500 crores (excluding the investment already made) within a time frame of 5 years (relaxable upto 7 years in special cases), will also be eligible for the concessions referred to in sub-paras (i) to (v) in para 2 above, provided they satisfy the additional turnover norms for expansion / diversification.