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Home > Discover Hyderabad > Trade and Commerce > Incentives

 
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Incentives for
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INCENTIVES OFFERED BY THE GOVERNMENT OF ANDHRA PRADESH FOR NEW PROJECTS:

 

Incentives & assistance for airports

  • The investors would be left free to fix their own tariff for various airport services without it being a detriment to the development of the airport in the short or long run.
  • The investors will be given complete freedom to follow their own personnel and employment policy, without being governed by the rules and practices in other airports.
  • The Government will assist in the acquisition of land.
  • The Government will help in obtaining fresh water supply and power supply to the investors.

 

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Incentives & assistance for ports:

  • Investors have freedom to follow their own personnel and employment policy without being governed by the rules and practices in other Indian ports.
  • The government will help in the acquisition of land and water frontage on payment by the investors. Wherever port land is available, it will be provided to the investors at the rates prescribed by the Andhra Pradesh government.
  • The land required for the industries which need to be located close to a port, can be acquired by the APHC on the basis of a feasibility report made by the investor. If the investor wants to own the land and lease it out to industries, the land can be acquired at the prevailing market price under the Land Acquisition Act.
  • The government will help in obtaining fresh water supply and power supply to the investors.

Key policy changes in shipping & ports

  • Indian Ports Act amended to permit 100% foreign ownership and foreign directors
  • Automatic approval for acquisition of all categories of vessels
  • Cabotage laws relaxed
  • Package for the economic revival of shipyards
  • Reserve Bank of India to permit Foreign Exchange for ships
  • Repairs/dry docking and spares for imported capital goods, without any value limits.
  • Freight charges on movement of fertilizers & petroleum products to be paid in convertible currency.

Guidelines for the development of ports:

  • Investors will ensure that the acquired land and water frontage is used for providing port services only.
  • Services will have to be provided efficiently and economically. The minimum level of performance will have to be guaranteed.
  • Parties permitted by the Government to set up and operate the port terminal will be required to observe the customs and laws of the land and also to follow the rules and regulations. The parties will provide facilities to the Customs Dept. and other government agencies as per the rules.
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Rebate in Power Bills:

All new industries, other than those ineligible (as listed under 'Investment Subsidy'- for details on this, please refer the A.P. State Policy for Incentives to Industry) and other than those set up in the Municipal Corporation areas of Hyderabad, Vijaywada and Visakhapatnam, will be eligible for 25% rebate in power bills (both demand and energy) for a period of 3 years from the date of commencement of commercial production. The maximum total admissible rebate for the three years will be Rs. 50.00 lakhs in respect of large and medium industries and Rs. 30.00 lakhs in respect of small scale industries.

Note: The existing procedure followed by the District Industries Centre, of issuing an eligibility certificate and that of the Andhra Pradesh State Electricity Board, of issuing an Admission of Claim, will continue.

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Special Tax Concessions:

The Government offers a wide range of concessions to investors in India, to promote industrial growth and exports. They include:

  • Deduction of preliminary and pre-operative expenses in setting up a project.
  • Complete tax exemption for profits from exports.
  • Full or part exemption of foreign exchange earnings on construction projects, hotels and tourism-related services, royalties, commissions etc.
  • Five-year tax holidays within the first eight years of commercial operations for 100% EOUs and units in EPZ.
  • Tax exemption for income from export of computer software or technical services.
  • Deduction of capital research and development expenditure.
  • Tax holiday for profits from new power projects for the first five years of operation.
  • Special concessions to foreign companies in selected areas: oil and gas operations, turnkey power projects and shipping

Revenues accruing to foreign companies including royalties and technical services fees)in connection with the exploration or production of oil, enjoy special concessions in computation of taxable income and are taxed at the rate of 50%, instead of 65% which is the figure applicable for foreign companies, as a rule.

Foreign companies engaged in the execution of turnkey power project contracts, which have been approved by the government and financed by an international aid programme, are subject to a tax on a deemed profit of 10% of gross revenues.

Shipping companies are liable to pay tax on income on a deemed profit of 7.5% of freight revenues earned from shipping operations in India.

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Relief for Foreign Nationals:

A 'short stay' exemption applies wherever all the following conditions are met:

  • The individual is a foreign national employed by a foreign company not doing business in India.
  • His stay in India does not exceed 90 days in a tax year (extended to 183 days in certain tax treaties)
  • His remuneration is not deductible in arriving at his employer's Indian taxable income.
  • Foreign technicians in certain prescribed areas are eligible for a special exemption from tax on their salary income. Their employers could pay the tax on their salaries without such tax being held as part of salary, for tax purposes.
  • Foreign nationals are exempt from tax for any home leave travel benefits for themselves and their families, provided by the employer.

 

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Electronics Hardware Technology Park (EHTP)/Software Technology Park (STP) Schemes:

In order to provide impetus to the electronics industry, to enhance its export potential and to develop an efficient electronic component industry, EHTP & STP schemes offer a package of incentives and facilities. The scheme is administered by the Department of Electronics, Government of India and it's salient features are:

  • Duty-free imports are permitted for all types of goods, including capital goods required by EHTP/STP units for their production, provided that they are not items in the negative list of imports of the EXIM Policy.
  • Second-hand capital goods can also e imported by EHTP/STP units in accordance with the EXIM Policy.
  • The entire production should be exported to hard currency areas. Sales in the Domestic Tariff Area (DTA) are permissible as per the norms decided by the Department of Electronics and are subject to fulfillment of value addition criterion as prescribed.
  • Units should operate in custom-bonded premises.
  • Tax holiday is admissible for such units for a block of five years, in the first eight years of operation.
  • Deemed export benefits are also admissible.
  • 100% foreign equity participation is permissible, under the scheme.
  • The minimum value addition for software components is 60%.

Incentives for IT units:

  • Software units are exempt from the purview of the AP Pollution Control Act, except in respect of power generation sets.
  • Industrial power tariff and all other admissible incentives and concessions applicable to industries in respect of power shall be applicable to the IT industry, including those in the urban areas. A concession of 25% on the power tariff shall be allowed to the new IT industrial units for a period of three years from the date of release of power or of going into actual commercial production, whichever is comes first.
  • Software industries have been totally exempted from the payment of sales tax, payable under the provisions of the A.P. General Sales Tax Act, 1957.
  • The IT software industry is exempt from zoning regulations for the purpose of location.
  • The govt. agrees in principle, with the suggestion by the IT companies, of self-certification/exemption as far as possible for the IT software industry, from the provisions of the following Acts/Regulations:
  1. The Factories Act.
  2. The Employment Exchange (Notification of Vacancies Act)
  3. The Payment of Wages Act.
  4. The Minimum Wages Act.
  5. The Contract Labour (Regulation and Abolition) Act
  6. The Workmen Compensation Act.
  7. The Andhra Pradesh Shops and Establishments Act
  8. The Employees State Insurance Act.
  • General permission has been given to run a three-shift operation.
  • Rebate in the cost of land allotted to an IT industry at Rs. 20,000 per job created, subject to the following conditions:
  1.     The rebate shall be restricted to Rs. 20,000 per job created or the cost of the bare land (excluding development charges) whichever is less, subject to a ceiling computed at the rate of .30 acres for every 100 jobs created, no concessions are applicable.
  2.     The minimum number of employees to be hired by a company in order to avail the concession on land cost in excess of the limit, i.e. the ceiling of .30 acres for every 100 jobs created, no concessions would be applicable.
  3.     On areas allotted in excess of the limit i.e. the ceiling of .30 acres for every 100 jobs created, no concessions are applicable.
  4.     The minimum gross salary/wage for an employment to be considered to have been created would be Rs. 5000/- per month. 5. The period for which such employment would have to sustained to be eligible to be reckoned for this incentive, shall be two years.
  5.     The number of employees to be considered for the purpose of this provision shall not exceed the number arrived at by the formula: [no. of computer work stations at a location * (1.33) * number of shifts (of 8hours each) operated by the company at the location.]
  6.     APIIC shall specify suitable guidelines to ensure that the benefit of this provision reaches a company only after it meets the stipulated conditions regarding job creation and that the employment figures reported are corroborated by other supporting data such as investment, turnover, returns filed with RBI and returns filed with STPI, Hyderabad.
  7.     The concessions linked to employment generation will be limited to the extent of the number of persons of Andhra Pradesh origin employed by the company. A company will be free to employ persons as per their own policies subject to conformity with local regulations as applicable. However, the concessions available under this incentive will be restricted to the number of persons of AP origin employed by the company. For the purposes of this provision, a person of AP origin is defined as a person who, at the time of employment by the company, has been

- a resident of the state of AP

- domiciled in the state of AP

- born in the state of AP

- studied in a school/college/university in the state of AP

- a person either of whose parents were born or attended school/college/university/ in AP or were domiciled in AP.

  • For IT infrastructure companies establishing facilities on private/APIIC/Govt. lands, concessions will be in the form of rebate on registration and transfer of property charges and exemption from stamp duty on a tapering scale for sale/lease of built-up space to the IT industry.
  1.      For facilities established and sold/leased before 1-4-2000, the rebate is 90%
  2.      For facilities established and sold/leased on or after 1-4-2000 but before 1-4-2001, the rebate is 70%
  3.      For facilities established and sold/leased on or after 1-4-2001 and up to 31-3-2002, the rebate is 50%.
  4.      This concession will be available only to IT parks notified by the department of Information Technology and Communications ( I.T.&C) and which provide certain minimum facilities like uninterrupted/back up power and supply of reliable telecom links.
  5.      The rebate would be available only for the first transaction, when the first sale by the infrastructure company is made to an IT industry.
  6.      The above concession would also be available on the purchase of land by an IT industry establishing an IT park for its own use, provided it does not avail the concession linked to employment, mentioned above. IT & C Dept. would stipulate such conditions as may be necessary in this regard, while notifying such IT parks.
  • For It industry/IT infrastructure companies establishing facilities on private lands outside the limits of the Municipal Corporations and the nine surrounding municipalities of Hyderabad and Gaddiannaram village, relaxation of FAR to the extent of 50% of the prevailing norm will be available. For example, if the normal FAR were 1.5, the FAR allowed in such cases would be 2.5.

1. This concession would be available only to IT parks notified by the Department of Information Technology and Communcations and which provide certain minimum facilities like uninterrupted/back-up power, reliable telecom links etc.

2. This incentive would not be available in respect of government/APIIC lands allocated at a concessional price.

  • District headquarters and other major economic nodes in the state like Vijaywada and Tirupathi offer highly competitive locations for IT parks for IT Enabled Services as skilled and semi-skilled manpower is readily available at these locations and the cost of living is very low. The govt. will consider providing required telecommunication linkage through the A.P State Wide Area Network (APSWAN) to such IT parks.
  • Investment subsidy for new IT (hardware and software) industries: Investment subsidy:20% of the fixed capital investment but not exceeding Rs. 20 lakhs; however in respect of entrepreneurs belonging to the scheduled castes and scheduled tribes categories, the investment shall be 25% of the Fixed Capital Cost, not exceeding Rs. 50.00 lakhs. This subsidy shall not be available to IT industries availing of the rebate on land cost. [Fixed capital investment, wherever mentioned, refer to the original fixed capital invested in the project, before depreciation.]
  • The IT & C Dept. shall prescribe a procedure for scrutiny and sanction of the claim of units involving eligible capital investments as specified from time to time. The Commissioner of Industries shall pay the sanctioned amounts to the units from the same provision and head of account from which investment subsidy is paid to industries.
  • The decisions of the Information Technology and Communications Department shall be final in scrutinizing and deciding the eligible investment and sanctioning the incentives for eligible industries.
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Special incentives for mega projects/pioneering projects:

Mega projects, with investment exceeding Rs. 100 crores, will be considered on a case-by-case basis and a Special Package of Incentives based on gestation period of the project, pioneer nature of the project, vocational aspects, state of the art technology, profitability, scope for further related investment etc may be worked out. This package will include any similar incentives of State Government/Central Government institutions/agencies already availed/Central incentives, which may be announced from time to time by the Governemnt of India and other such incentives extended by any other Government agency. It will initially be valid for a period of three years and subject to review thereafter.


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