Subsidies for manufacturing in India: Maharashtra – package scheme of incentives, 2019

published on 27 March 2024 | reading time approx. 6 minutes

In our special series of articles on the subsidies provided by State Governments in India, we start with Maharashtra where the State Government has been issuing incentive schemes for manufacturing companies in the form of “Package Scheme of Incentives” since 1964. The last update in such schemes has been in 2019, when the Government unveiled the PACKAGE SCHEME OF INCENTIVES, 2019 (“PSI, 2019”). PSI, 2019 emphasizes on ensuring sustained industrial growth, improving the conducive industrial climate and providing a global competitive edge to the industries in the State. An overview of PSI, 2019 in terms of applicability, benefits, timelines etc. have been provided below.

Who can apply for the benefits under PSI, 2019? »
What are the benefits under PSI, 2019? »
When should an entity apply for the benefits under PSI, 2019? »
Why should an entity evaluate subsidies for manufacturing before setting up business in India? »

Who can apply for the benefits under PSI, 2019?

An entity commencing a new unit in the state of Maharashtra or undertaking expansion or diversification of an existing unit in the state of Maharashtra falling under the specified categories can apply for the benefits. The categories – Micro, Small and Medium Enterprises (“MSME”), Large Scale Industries, Mega Projects, and Ultra Mega Projects are based on “Gross Fixed Capital Investment” and “Number of Direct Employment generated”. The quantum to qualify in a category differs from one zone to another within the state of Maharashtra. The categorization under PSI, 2019 can be further understood from the following table:

What are the benefits under PSI, 2019?

As the benefits under PSI, 2019 differ for one category to another, an applicant can evaluate the benefits that are

available based on the category, the applicant would fall into. Some of the major benefits under PSI, 2019 are elaborated below:

Industrial Promotion Subsidy (“IPS”) as a percentage of gross State Goods & Services Tax (“SGST”) payable by the unit on the first sale of eligible products billed and delivered within the state of Maharashtra.

Exemption from payment of Stamp Duty during the investment period for acquiring land (including assignment of lease rights and sale certificate) and for term loan purposes.
Exemption from payment of Electricity Duty during the applicable eligibility period. In addition to electricity duty exemption, MSMEs would be entitled to receive power tariff subsidies as well.
New MSMEs would be eligible for Interest Subsidy in respect of interest actually paid to the Banks and Public Financial Institutions (excluding unsecured loans, private loans/borrowings, loans from NBFCs etc.). The amount of interest subsidy would be calculated at an effective rate of interest, after deducting the interest subsidy receivable from any agency of the State Government or under any Government of India Schemes.
Research and Development units including stand-alone facilities of eligible industrial units would be considered as part of Fixed Capital Investment (“FCI”) for the purpose of availing fiscal incentives up to 25 percent of FCI (max. INR 1 billion).
Apart from the above, other benefits such as subsidy on additional capital equipment acquired for Technology Up-gradation, subsidy on the expenses incurred on quality certification, subsidy on additional capital equipment acquired for cleaner production measures, etc. are also offered in PSI, 2019.
Separate policies have been notified for providing incentives for investments in specified Thrust sectors where location constraints have been eliminated and investment limits have been reduced.

When should an entity apply for the benefits under PSI, 2019?

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Why should an entity evaluate subsidies for manufacturing before setting up business in India?

Being the fastest growing major economy in the world, India is an attractive investment opportunity for the businesses around the world. Understanding this factor and with the vision of “Make in India”, the Central and State governments of India are incentivizing businesses to set up manufacturing units in India.

Apart from the above discussed PSI, 2019, the Maharashtra State government offers various sector specific schemes. Further, the Central Government of India has separate incentives under Foreign Trade Policy and has notified various sector specific policies. Furthermore, other states in India also offer state specific and sector specific schemes of incentives for promotion of manufacturing industry which we would be covering in the future. Please note that several policies are not exclusive, and an eligible entity can claim benefits under 2-3 different policies for the same manufacturing unit.

In case a business entity claims benefits under either of these schemes, it can result in substantial reduction of the capital investment over a period of time and effective management of cash flow for the business. Accordingly, with the wide range of scheme and incentives available to manufacturing units in India, which offer different and substantial benefits and incentives, it becomes relevant to analyze these schemes and policies prior to finalizing the location to set up a manufacturing unit in India.