In a double bonanza of sorts for IT and telecom sectors, companies that have approvals under the M-SIPS scheme and start operations between October 1 this year and March 2023 can avail of the 15% tax rate for new manufacturing companies as well as benefits under the capital subsidy scheme. M-SIPS is the Modified Special Incentive Package Scheme, aimed at encouraging electronics manufacturing, which ran from 2012 to 2018.
“Any new company into manufacturing set up during the relevant period will be eligible,” said a senior government official. “It cannot avail of any other incentive or holiday under the income tax, but incentives under other schemes can be availed.”
Finance minister Nirmala Sitharaman had on September 20 slashed the corporate tax rate for new manufacturing companies to 15% from 25% to spur investment, revive growth and boost job creation. India is looking to pitch itself as an alternative investment destination with low tax rates in Asia as businesses seek to relocate away from China in the wake of a trade dispute with the US.
The benefits of low tax rates and MSIPs will make it doubly attractive for companies that have approvals and are yet to start operations. There had been confusion about whether both these benefits could be availed of by such firms. Industry and the ministry of electronics and IT had sought clarity on the matter. The official said benefits under other schemes can be availed of under the 15% corporate tax rate framework.
M-SIPS provided multiple incentives for 10 years, including a capital subsidy of 20% in special economic zones (SEZs) and 25% in non-SEZs for units engaged in various kinds of electronics manufacturing, besides reimbursements of countervailing duty or excise on capital equipment for the non-SEZ units. For some high-capital investment projects, it also provided reimbursement of central taxes and duties.
The incentives were available for 29 electronic verticals across the manufacturing value chain. The scheme was closed in December 2018 and the period of the benefits was reduced to five years from 10.
Under M-SIPS, 419 investment proposals involving investments of Rs 1.13 lakh crore were received until December 2018, as per the National Policy for Electronics 2019.
Out of these, 197 applications with a proposed investment of Rs 41,791 crore have been approved. Another 19 applications with a proposed investment of Rs 14,764 crore have been recommended by the Appraisal Committee for approval and 203 applications with a proposed investment of Rs 56,534 crore are under appraisal. Out of the 197 units that have been approved, 134 have commenced commercial production.―Business Telegraph