Subsidy Under Rajasthan Investment Promotion Scheme – 2014 in case of Expansion of Existing Unit

The following are the gist of provisions relating to expansion of existing units and applicability of RIPS – 2014 Scheme in these cases.

Meaning of Expansion

According to clause 2(xiv) of the Scheme “Expansion” means creation of additional capacity for production of goods or operation capacity for service in same line of production/ operation or through a new product line or new line of services by an existing enterprise provided that in case of expansion at existing site, additional investment is more than 25% of its existing investment (as per gross block) at the beginning of the year in which the project for expansion has been initiated at that site.

Following are the important points in the definition.

• Expansion should create additional capacity for production of goods / providing of services.

• The additional capacity may be in same line of production / operation or in any new line of goods / services.

• If the expansion is at existing site, the additional investment should be more than 25% of its existing investment (as per gross block) at the beginning of the year in which the project for expansion is started at that particular site.

 How the quantum of Subsidy will be calculated in the case of Expansion.

Investment Subsidy

• In case of investment subsidy, the subsidy shall be calculated on the amount of additional tax (VAT + CST) payable and deposited after expansion, as the case may be, over and above the maximum annual (VAT+CST) payable for any of the three years immediately preceding the year of the commencement of commercial production/operation.

• Where the tax rates differs in the three years immediately preceding the year of the commencement of commercial production, the maximum annual tax payable shall be rationalized by considering the highest tax rate in these three years.

• In case of change in the rate of tax of any goods, the maximum annual tax, in the three years immediately preceding the year of the commencement of commercial production shall be calculated at the new tax rate.

Employment Generation Subsidy

• In case of expansion, employment generation subsidy, for a month shall be allowed only for the employees appointed under expansion over and above the existing employees.

• In this case, the employment generation subsidy shall not exceed 20% of VAT and CST deposited over and above the maximum annual tax (VAT+CST) payable for any of the three years immediately preceeding the year of the commencement of commercial production as calculated in the procedure mentioned in above point.

Exemption from Electricity Duty

• The exemption from electricity duty shall be allowed only on the additional consumption of electricity made by the enterprise after expansion over and above the maximum annual consumption of electricity, in any of the three years immediately preceding to the year of commencement of commercial production.

• This exemption in any year shall be allowed only after attainment of maximum annual consumption of electricity, of the three years immediately preceding to the year of the commencement of commercial production.

CA Amit Mundhra

Author is a Fellow Member of The Institute of Chartered Accountants of India. He can be reached at amit.mundhra@gmail.com, Mobile : 9 8 2 9 0 1 0 1 7 2