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Incentive

General Package of Incentives

Government of Bihar recognizes the need of fiscal incentives to improve the competitiveness of the units operating in the state. Accordingly, Government of Bihar has formulated a customized package of fiscal incentives which takes into cognizance state‘s comparative advantages and will trigger the next round of industrial growth in the state.

For details please refer to BIIPP 2016 Policy

  • (i) These general provisions shall be applicable to all units eligible under this policy.
  • (ii) Effective date means the date on which the provisions of this policy come into force. This policy will remain in force for 5 years from the effective date.
  • (iii) The state would encourage the prospective promoters to avail term loan facility from the scheduled nationalized bank or financial institution approved by RBI/SEBI for setting up a unit and availing incentive on the investment.
  • (iv) Unit applying for incentives shall provide a Detailed Project Report (DPR) accompanying the Bank Appraisal Report prepared by the scheduled nationalized bank or financial institution approved by RBI/SEBI, which is supposed to extend the term loan to the unit. The appraisal report prepared by the bank/ financial institute shall form the basis for ascertaining the project cost for calculation of incentives.
  • (v) For the purpose of calculation of incentives under this policy, the approved project cost shall mean the project cost finally approved by the competent authority as defined by the Department of Industries from time to time. The approved project cost shall be the basis for determining the incentives.
  • (vi) In the approved project cost considered for incentive calculation under this policy, the cost of land shall not exceed a limit of 10% of the total proposed investment other than the land. Thus in the approved project cost either the actual cost of land mentioned in the project report assessed by the bank/ financial institutions or 10% of the total proposed investment excluding the land, whichever is less, will be considered. This principal shall be followed for examining all investments under this policy.
  • (vii) All incentives mentioned this policy under shall be provided post-production i.e. after the date of commercial production/ operations.
  • (viii) In case of SC/ ST entrepreneurs, the maximum limit of all kinds of incentives (except for land) shall be increased by additional 15% across all categories (i.e. MSME & large units).
  • (ix) In case of women, differently abled entrepreneurs, war widows, acid attack victims and third gender entrepreneurs, the maximum limit of all kinds of incentives (except for land) shall be increased by additional 15% across all categories (i.e. MSME & large).
  • (x) A unit will not get any incentive beyond a period of 5 years from the date of commencement of commercial production or 5 years from the date of end of this policy, whichever is earlier.
  • (xi) The incentives will cease either on the exhaustion of the applicable quantum or on the completion of the eligible period, whichever is earlier. Any unutilized incentive at the end of eligibility period shall lapse.
  • (xii) Any incentive under any other scheme/policy of the State Government or Central Government availed by a unit will not be considered for calculating the total accruable incentives to the unit.
  • (xiii) In the event of change in ownership or management of a unit, the same shall be intimated by the unit to the competent authority as defined by the Department of Industries from time to time. If required, a revised Letter/ Eligibility Certificate shall be issued to the unit (in the name of new owner) for balance incentives. The eligibility period shall not be extended under any circumstances and shall continue to be defined with effect from the original date of production.
  • (xiv) In the event of any change in the shareholding pattern of a unit promoted by SC/ST/ women/differently abled persons/ war widows/ acid attack victims/ third gender entrepreneurs within 5 years of start of the commercial production, the new shareholders should be from the same category. In case the new shareholders are not from the same category, the amount of incentive extended to such units shall become liable to be recovered from the date of availing such incentives along with interest compounded annually @ 18% per annum.
  • (xv) If any false declaration is given for the purpose of availing incentives or if any incentives are availed for a unit that was not eligible, the amount of incentives are liable to be recovered from the date of availing such incentives along with interest compounded annually @ 18% per annum. In case of non-payment within the stipulated time, the State Government may recover such amounts including interest as arrears of land revenue.
  • (xvi) Any attempt to break/ divide or merge units only for the sake of availing higher amount of incentive without substantial operational reasons shall be treated as misrepresentation of facts and will attract penal action as decided by the competent authority.
  • (xvii) Any existing or new units, expanding its capacity, diversifying, or modernizing during the policy period will be given the benefits as applicable to new units on their incremental approved project cost. To avail the benefits, there must be a capacity expansion/modernisation of at least 50% of the capacity of the existing unit.
  • (xviii) Negative list of industries/sectors which shall not be eligible for any incentives under this policy are stated in ―Annexure II - Negative list of industries‖. These industries/sectors shall not be eligible for any incentive, including under the GST regime.
  • (xix) All matters of interpretation/disputes shall be decided by the Industrial Development Commissioner/ Principal Secretary, Department of Industries. Such interpretation/decision shall be final.

High Priority Sectors

Pre-production incentives:

Type of Incentive Salient Features
1 Exemption from Stamp Duty/ Registration Fees
  1. No stamp duty to be paid in respect of land allotted by the government to IDA/ BIADA.
  2. 100% exemption of stamp duty/registration fees levied on lease/ sale /transfer of industrial land/shed as also those outside the jurisdiction of Industrial Area Development Authority would be available to all the new units. This exemption of stamp duty and registration fees will be granted only for the first time and will not be applicable in subsequent stages of lease/sale/transfer.This incentive will be available to new units only.
  3. The area of land required by the unit shall be fully described in the DPR and/or the Bank Appraisal Report prepared by the bank or financial institution which is supposed to extend the term loan to the unit.
2 Land Conversion Fees
  1. 100% exemption of “land conversion fees”/“change in land use” fees being levied for conversion of agricultural land.

Post-production incentives:

Type of Incentive Salient Features
1 Interest Subvention
  1. State shall extend “Interest Subvention” to the eligible units on the term loan availed by the unit from a bank/ financial institution registered by RBI/SEBI.
  2. Rate of interest for interest subvention will be 10% or actual rate of interest on term loan, whichever is lower.
  3. The overall limit of this subvention for high priority sector will be 50% of the approved project cost. The upper limit of this subvention shall be Rs 20 crore.
  4. Disbursement of the subvention amount would be in instalments linked with the term loan repayment schedule stipulated by the concerned bank/financial institutions which extends the term loan to the unit. Interest shall not be paid on promoter's contribution in any form in the unit.
  5. In case the promoters do not avail any term loan for the unit, they would not be eligible for this incentive.
2 Tax Related Incentive
  1. All new units will be entitled to avail 100% reimbursement against the admitted SGST deposited in the account of the state government (excluding strictly any tax paid by them arising out of a purely trading business), for a period of 5 years from the date of commencement of commercial production. The SGST reimbursement shall be applicable only to the net tax payable, after adjustment of input tax credit against the output tax liability. This shall have a maximum limit of 100% of the approved project cost.
3 Employment Cost Subsidy
  1. For ITand ITES Sector, ESDM, Leather and Textile Sector and Food Processing, 50% reimbursement (in case of male workers) and 100% reimbursement (in case of female workers) of expenditure on account of contribution toward ESI and EPF scheme for a period of 5 years for new units for those employees who are domicile of Bihar. Maximum limit for reimbursement will be Rs. 1000/- per month for SC/ST and women employee and Rs. 500/- per month for general employee.
3 Skill Development Subsidy
  1. The State Government shall provide skill development subsidy of Rs 20,000 per employee/ Bihar Skill Development Mission (BSDM) rates whichever is lower. This incentive will be applicable for training of employees/ staffs who are domicile of Bihar
  2. All the eligible unit will have to employ the trained core employee/ staff for a period of at least 1 year

Priority Sectors

Type of Incentive Salient Features
Reimbursement Stamp Duty/Registration
  1. No stamp duty to be paid in respect of land allotted by the government to IDA/ BIADA.
  2. 100% reimbursement of stamp duty/registration fees levied on lease/ sale /transfer of industrial land/shed as also those outside the jurisdiction of Bihar Industrial Area Development Authority would be available to all the new units after the unit commences the commercial production. This reimbursement of stamp duty and registration fees will be granted only for the time and will not be applicable in subsequent stages of lease/sale/transfer. This incentive will be available to new units only.
  3. The area of land required by the unit shall be fully described in the DPR and the Bank Appraisal Report prepared by the bank or financial institution which is supposed to extend the term loan to the unit.
Land Conversion Fees
  1. 100% reimbursement of “land conversion fees”/ “change in land use” fees being levied for conversion of agricultural land after the unit commences the commercial production.
Interest Subvention
  1. State shall extend “Interest Subvention” to all the eligible units on the term loan availed by the unit from a scheduled nationalized bank or financial institution approved by RBI/SEBI.
  2. Rate of interest for interest subvention will be 10% or actual rate of interest on term loan, whichever is lower. For micro and small units, there shall an interest subvention of 12%.
  3. The overall limit of this subvention for priority sector units will be 30% of the approved project cost. The subvention limit for non-priority sector units shall be 15% of the approved project cost. The upper limit of this subvention shall be Rs.10 crore.
  4. Disbursement of the subvention amount would be in instalments linked with the term loan repayment schedule stipulated by the concerned bank/financial institutions which extends the term loan to the unit. Interest shall not be paid on promoter's contribution in any form in the unit.
  5. In case the promoters do not avail any term loan for the unit, they would not be eligible for this incentive.
Tax related incentive
  1. All new units can avail tax related benefits with a maximum limit as defined below:
    • Non-priority sector:70% of the approved project cost
    • Priority sector: 100% of the approved project cost
  2. All new micro and small units will be given tax benefits by additional 30% of the approved project cost.
  3. All units engaged in generation of solar and/ or renewable energy for commercial purpose will be given tax benefits by additional 30% of the approved project cost.
  4. All new units will be entitled to avail 80% reimbursement against the admitted VAT/ CST/ Entry Tax deposited in the account of the State Government (excluding strictly any tax paid by them arising out of a purely trading business), for a period of 5 years from the date of commencement of commercial production. The VAT/Entry Tax/CST reimbursement shall be applicable only to the net tax payable, after adjustment of input tax credit against the output tax liability.
  5. Government of India is in the process of introducing a uniform Goods & Services Tax (GST) regime throughout the country. In case GST becomes effective, the tax related benefits will be suitably modified.
  6. All new units shall be eligible for 100% reimbursement of the electricity duty on power including captive power consumed by the same unit or exported to the BSPHCL from the date of commencement of commercial production for a period of 5 years subject to the overall limit defined above. Electricity duty exemption will not be available on captive power exported to entities other than BSPHCL.

Non-Priority Sectors

Type of Incentives Sailent Features
Reimbursement Stamp duty/Registration NIL
Land Conversion Fees NIL
Interest Subvention NIL
Tax Relate Incentives All new units can avail tax related benefits with a maximum limit as defined below:
  1. Non Priority sector:70% of the approved project cost

Dovetailing of incentives with the Central Government schemes would be allowed under this policy subject to the condition that the same asset should not be covered under both the State and Central Government schemes. Thus, in case of grant availed/ to be availed by the promoter on a particular asset of the unit under any scheme of GoI, the approved project cost for the purpose of calculation of incentive under state policy will be arrived at by deducting the value of that asset.

1.4.1. Efforts shall be made to promote entrepreneurship among the Scheduled Castes (SC) and Scheduled Tribes (ST).

1.4.2. In case of a new unit established by a SC/ ST entrepreneur, the rate of interest for interest subvention will be 11.5% or actual rate of interest on term loan, whichever is lower (except for Micro and Small units). In case of micro and small units being established by a SC/ ST entrepreneur, the rate of interest for interest subvention will be 13.8% or actual rate of interest on term loan, whichever is lower.

1.4.3. The overall limit of this subvention will be 34.5% of approved project cost (for priority sector projects)/ 17.25% of approved project cost (for non-priority sector projects). The upper limit of this subvention shall be INR 11.5 crore.

1.4.4. In case of a new unit established by a SC/ ST entrepreneur, she/ he will be entitled to avail 92% reimbursement against the admitted VAT/ CST/ Entry Tax deposited in the account of the State Government (strictly excluding any trading related taxes paid by them), with a maximum limit as defined below:

  • i. Non-priority sector:80.5% of the approved project cost
  • ii. Priority sector: 115% of the approved project cost

1.4.5. The State Government will provide Project Management Consultancy support to SC/ST entrepreneurs to facilitate the establishment and operation of units.

1.4.6. Special clusters shall be created for such entrepreneurs with common facilities.

1.5.1. Efforts shall be made to promote entrepreneurship among the women, differently abled persons, war widows, acid attack victims and third genders.

1.5.2. In case of a new unit established by women, differently abled persons, war widows, acid attack victims and third gender entrepreneurs, the rate of interest for interest subvention will be 11.5% or actual rate of interest on term loan, whichever is lower (except for Micro and Small units). In case of micro and small units being established by women, differently abled persons, war widows, acid attack victims and third gender entrepreneurs, the rate of interest for interest subvention will be 13.8% or actual rate of interest on term loan, whichever is lower.

1.5.3. The overall limit of this subvention will be 34.5% of approved project cost (for priority sector projects)/ 17.25% of approved project cost (for non-priority sector projects). The upper limit of this subvention shall be INR 11.5 crore.

1.5.4. In case of a new unit established by the entrepreneur, he/ she will be entitled to avail 92% reimbursement against the admitted VAT/ CST/ Entry Tax deposited in the account of the State Government (strictly excluding any tax paid by them arising out of a purely trading business), with a maximum limit as defined below:

  • i. Non-priority sector:80.5% of the approved project cost
  • ii. Priority sector: 115% of the approved project cost

Dovetailing of incentives under the Chief Minister Cluster Development Scheme for the establishment of the CFCs would be allowed under this policy. It would however be subjected to the condition that the same asset should not be covered under both the industrial investment promotion policy and the said scheme. Thus, in case of incentives availed/ to be availed by the promoter on a particular asset of the CFC under the said scheme, the approved project cost for the purpose of calculation of incentive under industrial investment promotion policy will be arrived at by deducting the value of that asset. 6.7. Incentive for Private Industrial Park

Incentives shall be made available for setting up of Private Industrial Parks. The effective guidelines of the scheme during the current policy period would be as follows:

  • (a) The private industrial park can be established by an individual promoter/ partnership firm/ LLP/ company or any entity registered under the Companies Act/ Societies Act.
  • (b) The promoter of the park has to arrange for the land. The State Government would not have any role in arranging the land for the park.
  • (c) The minimum area of the proposed private industrial park should be 25 acres (3 acres in case of IT parks).
  • (d) The land proposed for the park should be under the absolute possession of the promoter and should be free from any encumbrances. It should not have been obtained/ owned by the promoter on leasehold basis.
  • (e) At least 20% of the land would be earmarked for the general use/development of basic infrastructure/ green area and future requirements.
  • (f) The industrial park shall have a minimum of 5 independent production units.
  • (g) The promoter would be responsible for the allotment of land/plots to the individual units. The State Government would not have any role in this.
  • (h) The promoter shall not create residential units in the industrial park or convert the industrial park into a real estate project. The industrial park shall only be used for industrial use. All private industrial parks shall be notified as industrial lands. Under no circumstances a private industrial park shall be put into any other use other than for industrial purposes.
  • (i) The rates for the industrial plots in the private industrial park would be ascertained by the promoter. The State Government would not have any role in this.
  • (j) The promoter of the park would create a fund called ―Development Reserve Fund (DRF)‖ for the development of external infrastructure of the park. The promoter would contribute 5% of the fund collected through land allotment and 10% of the Annual Net Profit in the DRF. The DRF would be maintained in the form of a fixed deposit. A committee would be constituted for the operation of the DRF. The committee would consist of promoter/ representatives of the promoter and units operating in that park. At any point of time, a maximum of 33% of DRF can be used for the development of the appropriate infrastructure. Further, the promoter would charge a maintenance fee from the operating units in the park. The same committee would be responsible for the operation of the fund created from the maintenance fee collected.
  • (k) A private industrial park would be eligible for an interest subvention at the rate of 10% or actual rate of interest on term loan, whichever is lower, to the extent of 30% of the approved project cost subject to a limit of INR5o crore. A sector specific private industrial park for the priority sector units (for e.g. food parks, leather parks, textile parks, IT parks etc.) would be given an interest subvention to the extent of 35% of the approved project cost subject to a limit of INR 5o crore. The promoter of the private industrial park shall be eligible for the interest incentive after the completion of the park.
  • (l) In addition to the above, the private industrial park would also be eligible for the incentives mentioned under Section 1.2. Interest subvention shall be payable as per clause (k) above.
  • (m) All the units set up in a private industrial park would be eligible to avail incentives under the industrial investment promotion policy, based on their eligibility.
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