Capital Investment Subsidy: Information Technology (IT) / Information Technology Enabled Services (ITES) Industries under Motivation of Entrepreneurs to Start Industries and Fiscal Assistance to Industries

What is the IT/ITES Capital Investment Subsidy in Puducherry?

Capital Investment Subsidy for Information Technology (IT) and Information Technology Enabled Services (ITES) Industries is a component of the umbrella scheme "Motivation of Entrepreneurs to Start Industries and Fiscal Assistance to Industries", run by the Department of Industrial Development (Industries and Commerce), Union Territory of Puducherry. The component is often referred to locally by the short form used on the department's own listings, MESIFAI.

The component exists for one narrow purpose. Puducherry wanted software, IT-enabled services and back-office units to buy and install hardware and equipment inside the Union Territory rather than in neighbouring Tamil Nadu, and the subsidy reduces the effective cost of that equipment by a fifth.

According to the scheme details published on myScheme, a new IT or ITES industrial unit that started production on or after 6 November 2002 is given a subsidy on the investment made on plant and machinery at 20%, subject to a maximum of Rs 20,00,000, during the period of operation of the scheme.

Two features set this component apart from the general capital investment subsidy for industry in Puducherry:

• The eligible investment base is plant and machinery only. Land and building are not subsidised here, unlike the main capital investment subsidy component where all three heads count.
• The rate does not vary with the size of the enterprise. Large, medium, small and micro enterprises all receive 20% and all face the same Rs 20 lakh ceiling. In the general component, by contrast, micro and small units draw 40% while medium and large units draw 35%.

Who is eligible for the IT/ITES capital investment subsidy?

Units that can claim:

• A new IT or ITES industrial unit located in the Union Territory of Puducherry, that is, in the Puducherry, Karaikal, Mahe or Yanam region.
• Units of any size: large, medium, small or micro: since the rate and ceiling are uniform.
• Units that started production on or after 6 November 2002. That date is the operative cut-off for this component.

Who is not eligible:

• Units that commenced production before 6 November 2002. The component is written for new units from that date onward.
• Claims resting on second-hand machinery. Second-hand machinery is expressly excluded from the eligible investment.
• Private individuals seeking a personal benefit. This is a business incentive against documented capital expenditure by a registered industrial unit; there is no household, student or welfare element, and an individual cannot apply for a personal payment.
• Units that file late, meaning outside the one-year window described below, unless the delay is condoned.

A unit in the Karaikal region should read this component together with the separate 5% Additional Capital Investment Subsidy to Karaikal Region, under which IT industries in Karaikal are shown at 25% subject to a limit of Rs 25,00,000. The Karaikal component exists precisely to top up the standard rates for that region.

What counts as an IT or ITES industry here?

The Industries and Commerce Department uses a working definition across its IT incentives. In the related infrastructure subsidy component, "IT industries" is defined to mean manufacturers of computer systems, software and Information Technology Enabled Services (ITES), Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO). A unit that falls into one of those four descriptions is on solid ground; a unit at the edge of the definition should get the classification settled with the Directorate before it invests, not after.

What documents are required?

How to apply for the IT/ITES capital investment subsidy

1. Download the prescribed common application form for subsidies from the Directorate of Industries and Commerce website at industry.py.gov.in/common-application-subsidies. The same form set covers the several components of the Motivation of Entrepreneurs scheme, so tick the IT/ITES capital investment subsidy component clearly.
2. Fill in every mandatory field, in particular the date of commencement of production, the enterprise classification, and the itemised value of plant and machinery for which the 20% is claimed.
3. Attach self-attested copies of all mandatory documents, including the purchase invoices, the chartered accountant's certificate of investment, the DSTE consent orders and the notary affidavit.
4. Submit the duly filled and signed application with enclosures to the Directorate of Industries and Commerce, Industrial Estate, Thattanchavady, Puducherry 605009. Karaikal, Mahe and Yanam units may file through the Assistant Director's office in their region.
5. Ask for a receipt or acknowledgement carrying the date and time of submission and a unique identification number, and keep it safe. Every later status enquiry depends on it.

What happens after you file the claim?

The Directorate of Industries scrutinises the application on merit and works out the quantum of subsidy admissible. The file is then placed before the State Level Committee, which goes into the merits of each case, decides whether the unit qualifies, and recommends the amount payable. Sanction follows the committee's recommendation.

The date of commencement of production stated by the entrepreneur is admitted only after verification by officials of the Industries Department, so the date written on the form should be the date an inspection will confirm.

How is the IT/ITES subsidy disbursed?

The subsidy under this component is released in a single instalment, and the route depends on how the unit was funded.

• Units financed by financial institutions or banks: the subsidy is disbursed through the institution only, and is adjusted against the loan availed by the entrepreneur, or applied to the creation of additional fixed assets or to working capital.
• Self-financed units. The subsidy is disbursed directly to the entrepreneur.

For this purpose the department treats "financial institution" as including PIPDIC or any other government corporation, and scheduled banks including co-operative banks.

How to check the status of your claim

1. Keep the unique identification number from your acknowledgement to hand.
2. Contact the Directorate of Industries and Commerce, Thattanchavady, on +91-413-2248476, 2248168 or 2248320 and ask whether the file is under scrutiny, awaiting inspection, or listed before the State Level Committee.
3. Karaikal applicants can follow up with the Assistant Director at the Rural Industrial Estate, Kottucherry, on +91-4368-265438; Yanam on +91-884-2321257; Mahe on +91-490-233235.
4. If the unit is bank-financed, ask the branch separately when the sanctioned subsidy has been credited against the loan account, because the department releases the money to the bank rather than to the unit.

Why IT/ITES subsidy claims get rejected

• Production commenced before 6 November 2002, which puts the unit outside the component altogether.
• Second-hand machinery included in the claim, which is not eligible investment.
• The claim filed beyond one year of the commencement of production certificate, or beyond one year of completing expansion, diversification or modernisation for an existing unit.
• Investment figures that do not reconcile between the purchase invoices, the books of account and the chartered accountant's certificate.
• Missing DSTE consent orders, a very common gap for units that treat environmental clearance as unrelated to a subsidy file.
• Machinery bought in a personal name rather than in the name of the enterprise making the claim.
• The same investment already subsidised by the Central Government, a State Government or another agency. Double subsidy on one investment is not allowed under the umbrella scheme.

Grievance redressal

Complaints about delay or rejection go first through the Industries and Commerce Department's grievance redressal mechanism at industry.py.gov.in/grievance-redressal-mechanism. Above that, the Director of Industries and Commerce, Industrial Estate, Thattanchavady, Puducherry 605009, and the Secretary to Government (Industries and Commerce) at the Chief Secretariat, Puducherry 605001, phone +91-413-2336115, are the escalation points.

The prescribed application form is free to download. No consultant or agent has any special standing before the State Level Committee, and no payment is needed to have a claim listed for consideration.