corporate law

New Central Sector Scheme: Boosting Industrial Development in Jammu & Kashmir

Introduction

The Ministry of Commerce and Industry has introduced a New Central Sector Scheme aimed at enhancing industrial development in the Union Territory of Jammu & Kashmir. This initiative is designed to stimulate economic growth and establish a framework for eligible units to benefit from various incentives.

Scheme Overview

Scheme Title

The initiative is officially named the New Central Sector Scheme for Industrial Development of Jammu & Kashmir.

Coverage

This scheme encompasses the entire Union Territory of Jammu & Kashmir.

Effective Duration

The scheme will commence on April 1, 2021, and remain in effect until March 31, 2037.

Registration Application Period

  • Commencement: Registration will begin on April 1, 2021.
  • End Date: Applications will be accepted until September 30, 2024, adhering to specific guidelines.
  • Funding Limitation: If the registrations exceed 115% of the Approved Funds, the registration process may be temporarily or permanently suspended, subject to fund availability.
  • Additional Notes: Submission of a registration application does not guarantee registration; specific approval is required as per the guidelines. Units must register through an online portal.

Grant of Registration

All applications for registration will be processed by March 31, 2025, unless an extension is provided.

Definitions

Understanding key terms is essential for the effective implementation of the scheme:

  1. Approved Funds: Allocated financial resources for each scheme component.
  2. Arm’s Length Price: Pricing defined under the Income Tax Act, 1961.
  3. Commencement of Commercial Production and Operation: The beginning of manufacturing or service delivery on a commercial basis.
  4. Existing Unit: A unit that started commercial operations before April 1, 2021, and is GST registered in Jammu & Kashmir.
  5. New Unit: Defined for manufacturing and service sectors based on specific criteria, including registration timelines and investment conditions.
  6. Unit: Any manufacturing or eligible service entity registered under GST, excluding government-operated entities.

Additional Definitions

  • Substantial Expansion: Requires a minimum 25% additional investment in existing units.
  • Working Capital: The difference between current assets and current liabilities crucial for daily operations.

Eligibility for Incentives

Basic Eligibility Criteria

  • All manufacturing and service sector units can qualify for incentives.
  • Excluded industries are listed in Annexure-I (negative list).
  • Service sector units must invest a minimum of Rs. 1 crore in durable assets.

Commencement Requirements

Units must initiate commercial operations within three years from registration.

Nodal Agency

The Jammu & Kashmir Development Finance Corporation Ltd. (JKDFC) will serve as the primary agency for disbursing incentives via e-transfer to eligible units.

Governance and Implementation

The scheme will be managed under the supervision of the Department for Promotion of Industry & Internal Trade (DPIIT), with specific responsibilities delegated to local authorities in Jammu & Kashmir.

Committees for Oversight

  1. Apex Committee: Responsible for major modifications and approvals within the scheme’s financial framework.
  2. Steering Committee: Charged with monitoring implementation and registering approvals.
  3. Union Territory Level Committee: Ensures transparency and efficiency in execution and claims processing.

Incentives Provided

Eligibility conditions vary for several incentives:

1. Capital Investment Incentive (CII)

  • Eligibility Criteria: New units and existing units expanding their capacity.
  • Incentive Rates: 30% for Zone A and 50% for Zone B, with upper limits of Rs. 5 crore and Rs. 7.5 crore, respectively.

2. Capital Interest Subvention (CIS)

  • Incentive: Interest subvention for loans on eligible investments.
  • Rate: 6% for a maximum of seven consecutive years.

3. Goods and Services Tax Linked Incentive (GSTLI)

  • Eligibility: Available to new units regardless of investment, providing up to 300% of eligible investments.
  • Duration: Incentive lasts for 10 years from the commencement of operations.

4. Working Capital Interest Subvention (WCIS)

  • Eligibility: Existing units registered under GST prior to the scheme’s notification can receive this incentive.
  • Incentive Rate: 5% on working capital loans for five consecutive years.

Application and Claims Process

Detailed application procedures for registration and claims will be specified in forthcoming guidelines.

Processing Claims

Independent audits will ensure claims are scrutinized, with the JKDFC handling a portion of pre-scrutinies.

Rights of the Government

Any unit violating terms related to production or providing false information will be liable for recovery of incentives and possible legal action.

Conclusion

The New Central Sector Scheme for Industrial Development of Jammu & Kashmir offers a comprehensive framework for developing industrial capacity within the region. Eligible units are encouraged to take advantage of the benefits while adhering to the specified guidelines and governance protocols.