1.1 GENERAL ISSUES
1.1.1 Department of Information Technology (DoIT) acts as a single point interface for setting up an IT unit in the State. Applications for setting up an IT Industry are put up for one time approval of State Level Single Window Committee headed by the Chief Minister. A dedicated set of officials in IT Department assists the entrepreneurs in getting all statutory and other clearances.
1.1.2 IT Software and IT Services are deemed to be manufacturing activity for the purpose of incentives for the industry in line with the approved policy of Government of India. In fact, IT based units have been given the status of thrust industry as per the Rules Regarding Grant of Incentives, Concessions and Facilities to Industrial Units in Himachal Pradesh, 2004. The following definition entry has been included at Sr. No. 20 of Annexure-III: Information & Communication Technology Industry, Computer hardware, Call Centers, I.T. Software and services.
Notification No. 1(10)/2001-NER dated January 7, 2003 issued by the Ministry of Commerce and Industry, Government of India also categories IT as a thrust industry for the purpose of special package of central incentives (i.e. Income Tax exemption / concession, Central Excise exemption and capital subsidy) issued by the Government of India. Entry No. 13 reads as follows: Information & Communication Technology Industry Computer hardware, Call Centers.
Thus, all IT units falling in the above definition shall be entitled for Income Tax exemption / concession, Central Excise exemption and capital subsidy anywhere in the State. Other IT units can avail of these central incentive only on the khasra numbers specified in notification no. 50 /2003 CENTRAL EXCISE, Dated: June 10, 2003 and notification no. S.O.1269(E) dated November 7, 2003.
Depreciation norms and Loan for capital investments and working capital requirements for setting up an IT Industry are in line with the approved policy of Government of India.
1.1.3 All promotional and liberalized policy instruments available to the IT Software and IT Services are also made available to the IT Enabled Services including the Information Content Industry.
1.1.4 All IT software and service industries including Services and Training Institutions in IT are entitled to Industry status. Such units are eligible for all concessions and incentives applicable to Industries. For the purpose of this clause, accredited Training Institutions will also be eligible to claim industry status, subject to certain norms which enable them to obtain Term Loans and Bank Finance at industry rates.
1.1.5 Interest subsidy scheme available to other industries is applicable for both computer hardware and software sectors.
1.1.6 IT Software and Services industry is treated as industrial consumers. Industrial power tariff and all other admissible incentives and concessions applicable to industries in respect of power shall be applicable to the IT industry.
1.1.7 The State Government encourages flow of investments including FDI and provides full support wherever required. The State Government can offer customised package of incentives for prestigious investment proposals i.e. projects where total investments are more than Rs. 10 Crore or a Fortune 500 company is implementing the project. All such proposals are received by Department of Information Technology for approval on case-to-case basis on merit. For Mega Projects, with investment exceeding Rs.100 crore, the Government may consider Special Package of Incentives, on a case to case basis, based on the gestation period of projects, pioneer nature of projects, locational aspects, state-of-the-art technology, profitability, scope for further related investments, etc. Such special incentives may inter alia include exemption from registration and stamp duty.
1.1.8 Though there are hardly any power cuts in Himachal Pradesh, HPSEB still ensures uninterrupted supply of power to IT units treating it as a continuous process industry.
1.1.9 All IT Units with a connected load exceeding 100 KW shall be charged a concessional rate of Electricity Duty at the rate of 10 paisa per unit for a period of 5 years from the date of commencement of commercial production.
1.1.10 Out of turn preference and top priority is given to sanction power concession to all Information Technology Projects.
1.1.11 Despite easy and reliable availability of good quality power through H.P. State Electricity Board, IT units can create unlimited back up power and also seek permission for captive power generation.
1.1.12 It will be the endeavor of the state Government to rationalize the property tax in respect of the buildings housing IT units.
1.1.13 Permission for erecting towers & antennae up shall be granted by the concerned in a unified manner by the Municipal bodies, TCP Department and other concerned authorities.
1.1.14 Subject to a negative list to be brought out by the State Pollution Control Board (e.g. generator sets of very high capacity, effluent discharge in case of manufacturing units), there shall be no need of obtaining consent to establish and consent to operate.
1.2 TAXATION ISSUES RELATING TO TRADE IN IT PRODUCTS BY DEALERS OTHER THAN IT INDUSTRY
1.2.1 There is no Sales Tax for inter State transactions against From C and Form D. Rate of Sales Tax on production of Form CC (as notified by the Government of Himachal Pradesh) by the end customer is 1%.
1.2.2 Subject to the provisions of VAT Act and Rules, there is no General Sales Tax on IT products up to 31.03.2007.
1.2.3 As per special package of incentives granted by the Government of India for Himachal Pradesh, there is 100% outright excise duty exemption for 10 years from the date of commencement of commercial production (for units coming in production by 31.03.2007).
1.2.4 There is 100% income tax exemption for initial five years and thereafter a rebate of 30% is given for a period of five years from the date of commencement of commercial production.
1.2.5 All other industrial incentives of thrust industry as per the Industrial are also available to IT units.
1.2.6 It is pertinent to mention here that the above mentioned tax incentives are available for all industries irrespective of their market. While in case of SEZ, tax incentives are given only for exports, even domestic sales are eligible for tax incentives in case of Himachal Pradesh. Thus, in one sense, entire Himachal Pradesh is a virtual SEZ.
1.2.7 While there is a sunset clause of March 31,2009 for availing Income Tax exemption under STPI scheme elsewhere in the country, there is a general exemption/concession on Income Tax under section 80-IC of Income Tax Act in Himachal Pradesh for a period of 10 years for IT companies commencing their operations by March 31,2012.
1.3 LAND AND BUILDING RELATED ISSUES
1.3.1 As a special dispensation for IT units, land transfer cases for setting up of such units would be decided on top most priority.
1.3.2 For registered IT units within the declared Software Technology Park, IT habitats and Hi-tech city, relaxation of FAR to the extent of 50% of the prevailing norm is available. In other areas (not including core/banned/restricted/green areas), FAR relaxation up to the extent of 25% can be granted in individual cases subject to considerations relating to population densities, availability of infrastructure, local geology, etc.
1.3.3 IT Software units are permitted to be set up in residential areas subject to load restrictions.
1.3.4 Exemption from land and building tax is given to the land and buildings within the declared STP, IT habitats and Hi-tech cities.
1.4 FINANCIAL ISSUES
1.4.1 The State Financial Institutions and the Banks, in line with the approved policy of Government of India, treat IT Software and IT Services as priority sector.
1.4.2 State Financial Institutions and the banks are allowed to invest in this industry in the form of equity in line with the approved policy of Government of India.
1.4.3 The State Govt. will facilitate the creation of a Venture Capital fund of Rs. 20 crore in association with the State Co-operative bank, SIDBI and other Financial Institutions to meet the equity requirements of the Small and Medium Enterprises/IT Startups.
1.5 LABOUR RELATED ISSUES
1.5.1 IT Software and IT Services companies, being the constituents of the knowledge industry, are exempted from routine inspection by the inspectors from different departments in line with the approved policy of Government of India. Moreover, the State Government agrees in principle to self-certification as far as possible for the IT Software Industry under various labour laws.
1.5.2 General permission is accorded to run a three-shift operation to the IT Software and Services industry.
1.5.3 Permission is accorded for women workers engaged in IT Software and Services industry to work in three shifts.
1.5.4 The Self-Certification Scheme will be made applicable only to the IT Software and Services Industry on the basis of an option to be exercised.
1.5.5 A web portal is being created to give industries in Himachal Pradesh information about availability of skilled and unskilled manpower in Himachal Pradesh.