Gujarat Textile Policy 2024: Interest Subsidy (Fiscal Incentives to Labour Intensive Unit)

What is the Gujarat Textile Policy interest subsidy for labour intensive units?

Gujarat Textile Policy 2024 is a policy of the Industries and Mines Department, Government of Gujarat, notified through Resolution No. IMD/WRT/e-file/9/2023/2817/CH dated 15 October 2024. Its operative period runs five years, from 1 October 2024 to 30 September 2029. The policy replaces the Scheme for Assistance to Strengthen Specific Sectors in the Textile Value Chain 2019, notified vide Resolution No. TEX/102018/3327/CH dated 10 January 2019.

Inside the policy, para 6 carries a separate and richer package of Fiscal Incentives to Labour Intensive Units. This guide covers the interest subsidy in that package: a credit-linked interest subsidy of 7% on the term loan for 8 years, capped at 3% of eligible fixed capital investment per year.

The design point is employment. Where the general textile incentives in para 5 vary sharply by activity and taluka, Activity-2 units in a Category 3 taluka get only 5% for 5 years, capped at 2% of eFCI a year, the labour intensive package gives the same top rate everywhere: 7% for 8 years, up to 3% of eFCI a year, for both Activity-1 and Activity-2, in Category 1 and PM MITRA Park, Category 2 and Category 3 talukas alike. A unit that hires at scale is not penalised for where it locates within eligible areas.

What is a "labour intensive unit"?

The policy defines a labour intensive unit as a new industrial unit that provides employment to a minimum of 4,000 persons duly registered under the EPF scheme, of whom at least 1,000 must be female employees.

An existing industrial unit carrying out expansion or diversification of eligible activities during the operative period also qualifies, provided it creates totally new employment of at least 4,000 EPF-registered persons, including at least 1,000 women.

Two related definitions matter when counting. A worker under the policy is a person on the payroll doing manual, unskilled, skilled, semi-skilled, technical or operational work in the manufacturing process: accounts, administration and marketing staff do not count. Payroll or wages means basic salary plus dearness allowance for workers registered under EPF; other perks and allowances are excluded.

Which activities qualify?

Activity-1; garments, apparel and made-ups, and technical textiles, including composite units. Garments, apparel and made-ups are defined as wearable or non-wearable stitched fabric with at least two sides stitched using sewing machinery. Technical textiles covers the 12 segments identified by the Ministry of Textiles: Agrotech, Meditech, Buildtech, Mobiltech, Clothtech, Oekotech, Geotech, Packtech, Hometech, Protech, Indutech and Sportech.

Activity-2, weaving with or without preparatory, knitting, dyeing and processing, texturising, twisting, embroidery, and man-made fibre spinning to make yarn from polyester staple fibre or viscose staple fibre. Spinning of cotton and synthetic filament yarn is expressly excluded.

A composite unit is one that integrates spinning, weaving, knitting, dyeing, printing, finishing and packaging within its premises.

Who is eligible, and who is not eligible?

Who can claim

• An industrial undertaking — a company, partnership firm, LLP, industrial cooperative society or proprietary concern: engaged in an eligible activity. Self Help Groups engaged in these activities are also brought within the policy's benefits.
• A new industrial unit that commences commercial production of an eligible activity during the operative period, with a separate IEM or Udyam Registration and separately identifiable fixed capital investment.
• An existing industrial unit doing expansion; at least a 25% increase in gross fixed capital investment with at least 60% of it in plant and machinery, and at least a 25% increase in installed capacity, or diversification or modernisation.
• Units that meet the labour intensive thresholds get the para 6 package instead of the ordinary para 5 rates.

Who cannot apply or is not eligible

• An industrial undertaking located within the limits of a notified municipal corporation is not eligible for incentives under the policy.
• Units that commenced commercial production before 1 October 2024, whether or not they applied under the previous scheme, continue under the previous 2019 scheme as extended to 30 September 2024, and had to apply under it within 6 months of the new GR.
• Units without a term loan. The interest subsidy is credit-linked, and the companion capital subsidy is expressly available only to units availing a term loan.
• Units that fall short of 4,000 EPF-registered workers or 1,000 women do not get the labour intensive package, though they may still qualify for the general para 5 incentives.
• Individuals. No person applies for a personal benefit under this policy; workers receive their normal wages and EPF, and the payroll assistance is paid to the employer.
• A unit that becomes a defaulter loses interest subsidy for the default period, determined under RBI guidelines, and that period is deducted from the eligible period.

How much does a labour intensive unit get in total?

Payroll assistance goes only to domicile workers registered under EPF, and the capital subsidy ceiling of Rs 150 crore for a labour intensive unit is 50% higher than the Rs 100 crore ceiling for an ordinary Activity-1 unit.

How to apply for the Gujarat Textile Policy interest subsidy

1. Register with the Industries Commissioner. Other than MSME units, an industrial unit must apply for registration to the Industries Commissioner in the prescribed format within one year of the first disbursement of the term loan, one year of commencement of commercial production, or one year from the effective date of the policy: whichever is later. Attach the registration document and IEM, land possession papers with non-agricultural permission, GPCB Consent to Establish where applicable, the Detailed Project Report and the term loan sanction letter.
2. Commence commercial production during the operative period, since a registered project must do so to keep its eligibility.
3. Apply for the Provisional Eligibility Certificate to the Industries Commissioner within one year of the date of commercial production or of the registration certificate, whichever is later. MSME units with GFCI up to Rs 10 crore apply to the General Manager of the District Industries Centre, and those above Rs 10 crore and up to Rs 50 crore to the MSME Commissioner.
4. Apply for the Final Eligibility Certificate directly if the whole investment is already complete, or within one year of the last date of the eligible investment period if it is not. Late applications lose the delayed period.
5. Claim the interest subsidy after obtaining the eligibility certificate, choosing the date of eligibility either from the first disbursement of the loan or from the date of commercial production.
6. Cooperate with asset verification. The Industries Commissioner constitutes an Asset Verification team whose report decides the entitlement and goes to the sanctioning authority.

Sanction for a labour intensive unit, and for any unit with GFCI above Rs 50 crore, rests with the State Level supported Committee chaired by the Minister or Minister of State for Industries, with the Industries Commissioner as Member Secretary.

What conditions attach to the interest subsidy?

• Subsidy is calculated only on the term loan actually disbursed against the sanctioned amount for gross fixed capital investment counted in eFCI.
• Only interest and instalments actually paid are reimbursed. Penal interest and other charges are not treated as interest.
• The unit must pay regular instalments and interest; default periods are cut out of the eligible period.
• The unit must bear at least 2% of the interest in every case, including after any Government of India interest subsidy is offset.
• For a project under implementation as on 1 October 2024, only term loan amounts disbursed after 1 January 2024 are eligible, and assets acquired and paid for between 1 January 2024 and 30 September 2024 count towards eFCI.
• The eligible investment period extends 12 months from the date of commercial production for projects up to Rs 500 crore of gross capital investment, and 24 months above Rs 500 crore.

Where to get help

The implementing office is the Industries Commissionerate, Block No. 1, 2nd Floor, Udyog Bhavan, Gandhinagar 382 010, telephone 23252683 / 23252617, email iccord@gujarat.gov.in. The Industries Commissioner is authorised to implement, monitor and review the policy, and issues the detailed guidelines, third party inspection and audit procedures separately.

Any dispute, interpretation or contention under the policy is referred to the State Level supported Committee, whose decision is final and binding on the applicant. Registration and claim filing carry no fee.