Telangana offers 50-70% VAT refund to industries

The Telangana government has set a new benchmark in industrial incentives by offering reimbursement of 50-75 per cent VAT or the State Goods and Services Tax (SGST) for a period of seven years or up to the realisation of the fixed capital investment made by a medium or a large industrial unit.

This comes on top of other incentives such as power subsidy at the rate of Re 1 per unit and stamp duty reimbursement. The government has issued detailed orders specifying the amount of incentives applicable for various categories of industries including SC, ST and women entrepreneurs.

Though VAT reimbursement, along with most of these incentives, was in existence in the undivided Andhra Pradesh, this was only up to 25 per cent for a period of five years and the exemption limit was increased only in the case of big investments on a case-by-case basis.

Reimbursement of VAT equivalent to the capital investment proposed to be made by a company began when the state government of the undivided AP started chasing investments in the automobile sector, first with Tata’s Nano project and then with French company Peugeot though both went to Gujarat.

“Reimbursement of 75 per cent net VAT/CST or SGST for a period of seven years from the date of commencement of commercial production for medium-scale enterprises or up to the realisation of 100 per cent fixed capital investment, whichever is earlier,” the orders said. While the percentage of reimbursement was reduced to 50 per cent in the case of large scale industries, the outer limit for this facility had been kept on a par with the fixed capital investment for the large category units as well.

Micro, small and medium enterprises and those set up by SC, ST and women entrepreneurs have been given a liberal dose of incentives in addition to reservation of industrial plots for them.

Textile sector
For the textile sector, the state government has extended the interest subsidy facility at the rate of 4 per cent for spinning activity and 6 per cent for industries involved in composite activities, including spinning, weaving, dyeing etc, for a period of five years.

The incentives announced for new industrial investments will also be applicable to projects involving substantial expansion/diversification of existing industries, the government said.

According to government definition, investments of above Rs 200 crore made in plant and machinery or providing employment to more than 1,000 persons are considered as mega projects, which will receive tailor- made incentives over and above the standard set of incentives provided in the policy. Large projects are those that involve an investment of between Rs 10 crore and Rs 200 crore in plant and machinery while an investment of between Rs 5 crore and Rs 10 crore will form a medium-scale industry.

Apart from these incentives, the government has also made a provision of Rs 100 crore every year for providing infrastructure like roads and power under the Industrial Infrastructure Development Fund.

Source: Business Standard

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