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North East Industrial Development Scheme (NEIDS)

The Government of India has launched “North East Industrial Development Scheme” for industrial units in the North Eastern Regions of the country. This scheme aims to promote sustainable industrializations and employment generation in North East regions states including Sikkim. Under this scheme, the Government grants a package of fiscal incentives to eligible industrial units engaged in the manufacturing and service sectors. This article examines the North East Industrial Development Scheme (NEIDS) in detail.

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Objective of the Scheme

The objective of the scheme was to accelerate economic growth and boost in the process of industrialization in the North-Eastern Region of India.  In order to enhance employment in the North East regions, the Government is incentivizing primarily the MSME units through this scheme. All eligible industrial sectors, which are getting the benefits of one or more components of any other schemes of the Government, will also be considered for the benefits of other components of this scheme. The Government is also providing specific incentive amount through the scheme to generate employment.

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Key Highlights of the NEIDS Scheme

Some of the key features of the North East Industrial Development Scheme are given below:

• Benefits to industrial units: The Department through this scheme will provide various subsidies and benefits to all eligible industrial units. The overall cover for the benefits under all components of incentives will be of Rs.200 crores per unit.
• Several rights of the Centre/ State Government/ Financial Institutions have been enumerated under this scheme.
• All eligible industries will be entitled to various transport and employment benefits under the scheme.
• All such industries/units are needed to be mandatorily be registered with the Department.
• The claims for Capital Investment Incentive and Transport Incentive shall be scrutinized by independent audit agencies.
• The preference will also be given to the eligible industrial units under the Micro, Small and Medium Enterprises (MSME).
• On examining the proposals for incentive, due consideration will be given to the factors such as cost disadvantage project viability, bank-ability, employment generation and promoters’ risk capital.

Eligibility Criteria

• All new industrial sectors under the manufacturing and services sector including Biotechnology and also Hydel Power Generation Unit sectors that are up to 10 MW located in the North East Regions (NER), will be eligible for the incentives under this NEIDS scheme.
• All eligible industrial units will be allowed to get the benefits under one or more components under this scheme, even if such units are getting benefits under other schemes of the Government of India.
• The total benefits from various components of the scheme put together would be limited to the total investment in plant & machinery subject to a maximum limit of Rs. 200 crores per unit. Plant & Machinery for the service sector industrial unit would include the cost of construction of a building and all other permanent physical assets basic to the running of that specific service industry but exclude the total cost of land and consumables, disposables or any other item charged to revenue.
• Only new industrial units are eligible to avail the benefits under the scheme. This scheme would not be applicable to the industries that are:
  • Established by the splitting up or reorganizing an existing business
  • Created by the transfer to the new unit of plant and machinery previously used for any other purpose; and
  • Relocated from elsewhere and/or existing units reopened under a new name, brand, etc.

Incentives under the Scheme

Under the Scheme, the following incentives will be provided to the eligible new industrial sectors set up in the North-Eastern (NE) States (including Sikkim) on reimbursement basis:

S. No.	Incentive Type	Incentive Amount
1.	Central Capital Investment Incentive for the Access to Credit (CCIIAC)	The investment in Plant & Machinery of about 30% along with an upper limit of INR 5 Crores on the incentive amount per unit.
2.	Central Interest Incentive (CII)	Working Capital credit advanced of about 3% by the eligible Banks or Financial institutions for the first 5 years from the date of commencement of commercial production by the unit.
3.	Central Comprehensive Insurance Incentive (CCII)	100% Reimbursement of insurance premium on the insurance of  Plant & Machinery and building for the period of 5 years from the date of commencement of commercial production by the unit.
4.	Goods and Service Tax (GST) Reimbursement	The reimbursement that will be up to the extent of Central Government share of CGST and IGST for the period of 5 Years from the date of commencement of commercial production by the unit.
5.	Income Tax (IT) Reimbursement	Centre’s share Reimbursement of income tax for the period of first 5 years including the year of commencement of commercial production by the sector.
6.	Transport Incentive (TI)	The cost of transportation of about 20% including the subsidy currently provided by the Railways or Railway PSU for the movement of finished goods by rail. The cost of transportation of about 20% for finished goods for the movement through Inland Waterways Authority of India. The cost of transportation of about 20% of air freight on the perishable goods (as defined by IATA) from the airport nearest to the place of production to any airport within the country.
7.	Employment Incentive (EI)	The Government would grant 3.67% of the employer’s contribution to the Employees’ Provident Fund (EPF) in addition to that the Government bearing 8.33% of Employee Pension Scheme (EPS) grant of the employer in the scheme of Pradhan Mantri Rojgar Protsahan Yojana (PMRPY).

Guidelines for Claiming Incentives

The following are the rules for claiming various incentives under the North East Industrial Development Scheme (NEIDS):

Central Comprehensive Insurance Incentive (CCIIAC)

The claim for CCIIAC has to be submitted electronically within 1 year of the start of commercial operations. All requested details have to be provided, that includes the total investment in plant and machinery project, installed capacity, Transit Insurance premium paid, Freight charges, Cost of Productive equipment, etc. The industrial unit must also indicate in its online claim form that it is willing to allow the team of field inspection to visit the premises after the production has started to independently verify the existence of the plant & machinery in respect of which a claim has been filed.

Central Interest Incentive (CII)

The applicant has to submit a certificate with a recommendation statement/letter from a scheduled bank, or central or state financial institution, clearly indicating the credit limit that is granted by the bank with respect to the below following:

• Working capital requirement for the claim period
• Actual drawdown by the unit against the credit limit
• The total interest charged by the bank on the working capital utilization
• Rate of interest charged by the bank
• The marginal value of fund-based lending rates of the lending institution
• A claim must be submitted for a full financial year within 6 months after the end of that year

Central Comprehensive Insurance Incentive (CCII)

The claim for CCII must include all the details of buildings, plant and machinery insured have to be given in support of a claim for a complete financial year within 6 months after the end of that year.

Goods and Service Tax (GST) Reimbursement

The reimbursement on finished goods applies only to the central share of the net GST that has been paid and the rules that specify the method of calculating the refund amount. A claim must be made within 6 months after the end of the relevant quarter and the process for the approval of claims is similar to that adopted by the Central Board of Indirect Taxes and Customs for the GST reimbursement under other schemes;

Income Tax Reimbursement

The claimant has to provide a copy of the “intimation” that is issued under section 143(1) of Income Tax Act 1961 (ITA) and also confirmation of the amount of the claim. (The intimation is the preliminary assessment issued by the Centralized Processing Center of the Central Board of Direct Taxes (CBDT) after it has processed the taxpayer’s return and checked for any arithmetical inconsistencies, potentially incorrect claims, etc.) The claim should be filed online within 6 months from the end of the month that the intimation was issued. The reimbursement of income tax will be approved by the DPIIT in consultation with the CBDT.

Transport Incentive

The claims have to be submitted quarterly within 6 months of the end of the relevant quarter.

Employment Incentive

The claimant unit would register for the incentive via the Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) Portal.

Application Procedure for the Scheme

In general, follow the below procedure to apply for the North East Industrial Development Scheme (NEIDS):

Step 1: Firstly, all eligible industrial units will have to register under the NEIDS Scheme with the Department of Industrial Policy & Promotion, Ministry of Commerce and Industry, Government of India to avail the for any benefit under this scheme.

Step 2: The online application process would be developed under which the applicants have to submit the respective applications along with the Detailed Project Report (DPR).

Step 3: The Department of Industrial Policy and Promotion will separately issue all the detailed instructions for the use of portal online for NEIDS and registration of eligible units.

Step 4: The final grant of registration/in-principle approval will be decided by the Committee consider the prima-facie criteria of the industrial unit, availability of budget and decide the eligibility for registration under the Scheme.

Step 5: The units should start commercial production within 18 months of approval.

Step 6: After receiving the incentive(s), each industrial unit shall submit Annual Progress Report (APR) to the State Government or Department of Industrial Policy and Promotion concerned, about its working for a time period of 5 years after going into the production.

Release of Incentives

The North East Industrial Development Finance Corporation Limited will act as the nodal agency for disbursal of incentives under various elements of the Scheme. NEDFi will release incentive amount only through e-transfer to designated bank accounts of the eligible industrial units.

Note:

• In respect of all industrial units to whom the incentive is disbursed by NEDFi, the certificate of utilization of the incentives in Form 12(C) of the General Financial Provisions, 2017 for the purpose of which it was given would be furnished to the Department of Industrial Policy and Promotion by the financial institution or State Government concerned, within a time frame of 3 months from the issued date of receipt of the whole amount or last installment.
• No Industrial unit holds the right to register or claim the benefits under NEIDS unless it is clearly approved by the Central Government.
• The account holds no interest for the delay in payment of incentive amount that can be claimed by the industrial unit. The beneficiary under this Scheme must furnish an undertaking to abide by the terms and conditions of the Scheme.
• Without getting proper approval of the Union Ministry of Commerce & Industry, no industrial unit owner after receiving an initial or the whole of the incentive amount will be allowed to modify the ownership details of the whole or any part of industrial sector or effect any actual contraction or dispose of a substantial phase of its total fixed capital investment within a time frame of 5 years after its going into the commercial production. The industrial unit will also be required to keep DIPP informed about the change in location or contact information.