Industrial Development of Jammu and Kashmir – an attractive, multi-pronged incentive scheme for small to medium investments

Introduction

One of the key drivers behind the reorganization of the erstwhile State of Jammu & Kashmir (‘J&K’) into the Union Territory of J&K (‘UT’) with effect from 31 October 2019, was to usher in a new era of development based on the two pillars of industry and services.

To this end, on 19 February 2021, the Department for Promotion of Industry and Internal Trade (‘DPIIT’), of the Central Government has announced a New Central Sector Scheme for Industrial Development of the UT (‘Scheme’). The Scheme envisages a variety of incentives, viz., Capital Investment Incentive, Capital Interest Subvention, Goods and Service Tax (‘GST’) linked Incentive and Working Capital Interest Subvention.

Salient details of the Scheme

Quantum of incentives and key conditions

1.    Capital Investment Incentive

* The UT Government will declare and demarcate areas in the UT as ‘Zone A’ areas and ‘Zone B’ areas for the implementation of the Scheme.

2.    Capital Interest Subvention

3.    Goods and Service Tax (GST) linked Incentive

4.    Working Capital Interest Subvention

Eligible goods and services

Anti-Abuse provisions

Detailed anti-abuse provisions have been provided under clauses 12 and 13 of the Scheme.

Liability to refund incentives received have also been mandated in case any unit availing incentives under this scheme goes out of production/ operation permanently or changes location of the whole or any part of unit or disposes of a substantial part of its total fixed capital investment within 5 years after the date of commencement of production/ operation.

Governance

The governance and implementation of the Scheme will be through a three-tier structure – an Apex Committee (which includes the Union Home Minister), a Steering Committee (which includes the Secretary DPIIT along with other relevant Secretaries) and an UT level Committee which will be headed by the Chief Secretary.

The Jammu & Kashmir Development Finance Corporation Ltd. or any other agency authorized in this regard by the Central Government will be the nodal agency for disbursal of incentives under various components of the scheme.

Other Aspects

This Scheme will be effective from 01 April 2021 and will remain in force up to and inclusive of 31 March 2037.

Registration shall commence from 01 April 2021 and will continue till 30 September 2024, subject to the guidelines issued in this regard. Notwithstanding the aforementioned time period, if based upon the registrations already granted, the projected financial liability reaches 115% of the financial outlay allocated under each component of this Scheme (‘Approved Funds’), registration process may be paused, either temporarily or permanently. However, registration process may be resumed depending on availability of Approved Funds. News reports suggests that as on date Rs 28,400 crore has been allocated in total for this Scheme.

Concluding thoughts

While detailed guidelines are awaited on the process of application for registration, claiming incentives, approval and disbursal of claims, on the face of it, this appears to be a very attractive scheme of incentives for small-to-medium size investments in the UT.

If implemented effectively, the Scheme will certainly give a fillip to industrial and service sector growth and overall economic stability in the UT.

-         Sudipta Bhattacharjee (Partner)

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