The Karnataka Government recently announced various fiscal and non-fiscal incentives to give an impetus to Information Technology (IT) and Bio-Technology (BT) industries in the State. In order to enable identification of eligible units so that these incentives can be applied to them, BT and IT units need to obtain a Registration from the designated registering Authorities.
The Industries engaged in IT & Biotechnology along with Infrastructure Projects under these Sectors*; need to register their unit with the prescribed authority i.e. “Director IT & Biotechnology”. The Director IT & Biotechnology shall issue the registration certificate in the prescribed format. The necessary secretariat services shall be provided for registration of the companies by the Karnataka Biotechnology and Information Technology Services (K-BITS).
*Sectors: Companies engaged in Software, Telecom, Internet Data centers, BPO, ITES, Electronics Hardware, ESDM, Animation, Biotechnology and other industries mentioned in ICT, Animation, and ESDM & Millennium Biotechnology Policies can register under IT and BT registration.
Registration is required to avail benefits available to the companies. There is an application form that is to be filled in and submitted physically along with the documents prescribed in the Annexure of that form.
Application fee is: Rs. 10,000/- + Service Tax
And depending upon the project cost the fee varies for procuring the below exemptions starting from Rs. 20,000/-.
Two polices that are concerned here are Millennium IT Policy and Millennium BIOTECH Policy.
I. Benefits provided under the IT Policy are as follows:
A. Fiscal Incentives:
a) Under Millennium IT Policy the companies engaged in IT activities are exempted from the payment of ‘Entry Tax’ on capital goods and purchase tax on computer hardware, computer peripherals and other capital goods including captive power generation sets, during the implementation stage which can be extended up to five years from the date of commencement of implementation.
b) IT industries will be offered sales tax exemption for a period of 10 (ten) years or deferment for a period of 12 (twelve) years, subject to a ceiling of 200% (two hundred percent) of the value of fixed assets.
c) Captive power generation sets installed by the Information Technology Industry will be eligible for the total exemption from payment of electricity tax without any time limit.
d) Power: Software companies will be treated as industrial (and not commercial) and electricity tariff applicable to the industrial consumers will be levied on such companies. These industries would be given priority in sanction and servicing of power and would also be exempt from power-cuts without any time limit.
B. Concessions for Creating Employment:
a) All new IT companies which create employment of more than 250 in Bangalore & 100 in other areas during the first year are eligible for rebate on the stamp duty @15% and rebate on the cost of the land @15% in case companies get land from the state agencies like Karnataka State Small Industries Development Corporation, Karnataka Industrial Areas Development Board, KEONICS etc.
b) Labour Law: The Labour Department has also initiated procedures to exempt the IT companies from the preview of Industrial Employment (Standing Orders) Act 1946 and other relaxations in maintaining certain registers and filing returns under other laws.
Section 11 of the Shops and Commercial Establishments Act 1951 restricts the opening and closing times of any establishment and Section 12 requires closure of the establishment on one day of the week. Section 25 of the Act prohibits employment of women at night. IT industry will be outside the scope of section 11 and 12 of the Act. An amendment to Section 25 is also approved enabling the IT sector to employ women at night.
C. For IT Parks Concession are as follows:
a) Exemption from sales tax/works contract tax arising in the construction of the infrastructure facility for a period of three years or till the date of completion of the project, whichever is earlier.
b) 50% exemption from payment of stamp duty and registration charges on the first sales of land in the case of IT Parks.
c) Exemption from payment of entry tax on machines, equipment, capital goods and construction material procured for implementation of infrastructure projects, for a period of three years or till the date of completion of the project, whichever is earlier, subject to the condition that each invoice should be for not less than Rs.25 lakhs (Rs.1 lakh for construction materials).
II. Benefits provided under the BIOTECH Policy are as follows: Most of the concessions are almost similar to what are listed above.
a) The biotechnology industry will be exempt from the payment of entry tax on all inputs as well as capital goods, including captive generation sets, during the implementation stage, which can be up to 5 years or during the construction period whichever is earlier.
b) Mega Projects will be offered concession till a period of 8 years. They will be offered up to 50% concession on stamp duty and registration charges for first sale and first lease. A mega project will be one which will have investment of more than Rs. 50 crores in a new company or in the expansion of an existing company, or which will provide employment to 250 in Bangalore or to 100 in any other city in the State of Karnataka.
c) Captive generation sets installed by the biotechnology industry will be eligible total exemption from electricity tax for a period of 5 years.
d) Biotech companies will be treated as industrial, not commercial consumers and the relevant electricity tariff will be levied on such companies.
e) Concessions @15% rebate on land and 15% on stamp duty charges.
f) Labour Laws: Section 11 of the Shops and Commercial Establishments Act 1951 restricts the opening and closing times of any establishment and Section 12 requires closure of the establishment on one day of the week. Section 25 of the Act prohibits employment of women at night. IT industry will be outside the scope of section 11 and 12 of the Act. An amendment to Section 25 is also approved enabling the IT sector to employ women at night. The said benefit would also be made applicable to the biotechnology industry.
Disclaimer: This is not a legal opinion and should not be construed as one. Please speak with your attorney for any advice.