Agarwal Shraff & Co.

Chartered Accountants

Incentives under West Bengal Incentive Scheme’, 2000 for substantial expansion or
setting up of a new industry in the state of West Bengal

Value added Taxation is expected to be introduced replacing local sales tax in majority of
the states with effect from 1st April, 2003. The basic objective behind introduction of VAT
is uniformity in sales tax laws across the country. At present every state has their own
sales tax law for levying and collecting local sales tax. In order to attract capital
investment, most of the states used to offer exemptions, remissions or deferment in
payment of local sales tax for certain specified period for substantial expansion of an
existing industry or setting up of a new industry.

Many a states had to discontinue their sales tax related incentives for attracting capital
investment in pursuance of the National Policy. West Bengal government also
discontinued the same with effect from 1st January, 2000. However, keeping in view the
need for fiscal support for promotion of tourism & industry in the State of West Bengal,
State Government has introduced West Bengal Incentive Scheme 2000 w.e.f. 1st Janauary,
2000, in lieu of sales tax incentives, which shall remain valid for a period of 5years i.e.
till 31st December, 2004.

Under the scheme an industrial unit which is established and commissioned by the
entrepreneur for manufacture of goods in West Bengal for the first time on or after the 1 st
January, 2000 as well as a ‘Tourism Unit’ with a fixed capital investment of Rs. 100 lakhs
or more set up after the said date will be eligible for several fiscal incentives subject to
certain conditions. Any expansion of an existing unit, which increases the fixed capital
investment by not less 25% of the net value of fixed assets of land, building and plant and
machinery as on 1st January 2000 or Rs. 50 lakhs, whichever is less, will also be eligible
for similar fiscal incentives.

Eligibility criteria for incentives under the 2000 scheme

The project to which this scheme applies shall be eligible for incentives under the scheme
subject to the following :

a) The project is covered by a detailed feasibility report/ project report prepared for
the purpose;

b) The project has been approved and sanctioned by the Central Financial
Institutions or the Commercial Banks or the State Financial Institutions, as the
case may be. In the case of projects with arrangements of finance from own
resources, issue of eligibility certificate shall be considered provided the WBIDC
is satisfied about the arrangement of such finance.

c) Any industrial project in large and medium scale should have approval in form of
letter of intent, industrial licence or registration certificate, as the case may be,
under the Industries (Development and Regulation) Act, 1951 or an
acknowledgement in form of Secretariat for Industrial Assistance reference
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Chartered Accountants

number from Central Government. Any Cottage and Small Scale Industrial
Undertaking including Industrial Co-operatives, Tiny and Small Scale Service and
Business Undertaking registered under the District Industries Centre of the
Directorate of Cottage and Small Scale Industries. In case of ‘Tourism Unit’
registration certificate shall be issued by the Directorate of tourism and eligibility
certificate by the West Bengal Tourism Development Corporation.

Types and quantum of incentives:

For the purpose of types and quantum of incentive available under this scheme , the state
shall be classified in the following groups according to their location :

Group A – Kolkata Municipal Corporation.

Group B – Howrah, Hoogly, North 24-Parganas, South 24-Parganas, Bardwan, Nadia and
Midnapore districts.

Group C – Murshidabad, Birbhum, Purulia, Bankura, Malda, Coochbehar, North

Denajpur, South Dinajpur, Jalpaiguri and Darjelling districts.

No incentive will be granted to any unit set up in the area under Group- A subject to
certain exceptions.

Capital Investment Subsidy on Fixed Capital Investment

An eligible unit shall be entitled subsidy on the basis of fixed capital investment as
follows:-

Group B - @ 15% of the Fixed Capital Investment subject to a limit of Rs. 150 lakhs
Group C - @ 25 % of the Fixed Capital Investment subject to a limit of Rs. 250 lakhs

The ‘fixed capital investment’ shall be calculated as follows :

Interest Subsidy

@ 50 % of interest liability to the limit of Rs. 100 lakhs per year for :

Group B – 5 years
Group C –7 years

Employment Generation Subsidy

Subsidy on contribution made towards ESI and EPF @50%

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Chartered Accountants

Remission of Stamp Duty and Registration Fee for purchase acquisition of land and
buildings.

Waiver of Electricity Duty

An eligible unit will be entitled to a waiver of electricity duty for a period of 5 years.

Additional Incentives for “Tourism Unit” w.e.f. 1.7.2001

a) Such units in Group A shall also be eligible to all incentives admissible to a unit
in Group B area.

b) Apart from the above they will be eligible for Additional Interest Subsidy @10%
for additional 2 years.

c) Full exemption from Stamp duty and Registration Fees.

Mega Projects

A “Mega Unit” i.e. an eligible unit set up after 1.7.2001 with investment exceeding
Rs. 25 crores may be granted special package of incentives under this Scheme having
due regard to the characteristics of the project, case by case basis, in the following
areas :

a) size of investment
b) special nature of industry
c) employment potentiality
d) down-stream effect of the industry
e) ancillarisation effect of the industry
f) export potentiality.