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June 3, 2020

Govt of India Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing

by facelesscompliance in Compliance Law, Corporate Law

Govt of India Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing

What is the PLI scheme?

Ans: The Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing proposes a financial incentive to boost domestic manufacturing and attract large investments in the electronics value chain including electronic components and semiconductor packaging. The Scheme shall extend anincentive of 4% to 6% on incremental sales (over base year) of goods manufactured in India and covered under target segments, to eligible companies, for a period of five (5) years subsequent to the base year.

What is the duration of the Scheme?

Ans: In accordance with Para 6.1 of the Scheme, the Application Window shall be 4 months from the date of notification of the Scheme initially and may be extended and / or reopened based on response from the industry. Since, the notification has been published on 01.04.2020, applications under the scheme, complete in all respects, shall be received upto 31.07.2020.

What is the definition of Applicants under the Scheme?

Ans: Applicant for the purpose of the Scheme is a company registered in India, proposing to manufacture goods covered under Target Segments, and making an application for seeking approval under the Scheme. The applicant can operate new or existing manufacturing facility(ies) to manufacture goods covered under the Target Segments. The aforesaid manufacturing can be carried out at one or more locations in India.

Can I make multiple applications?

Ans: The number of applications allowed per applicant for support under the Scheme shall be restricted to one (1). Each application shall be limited to one of the Target Segments. However, an applicant may make another application for a particular Target Segment if the previous application has been rejected and closed by MeitY / PMA post examination.

What are the mandatory documents that needs to be submitted along with the information submitted in the application form?

Ans: The Applicant need to upload the following mandatory documents along with the information submitted in the application form.

  1. Certified copy of the memorandum and articles of association or equivalent registration document
  2. Self-certified copies of PAN, GST Certificate for applicant,
  3. Self-certified copies of brief profile of Chairman, CEO and CXOs
  4. Self-certified certified copies of Annual Reports including Annual Financial Reports along with schedules for 3 years. Most recent reports to be provided.
  5. Certificate from Company Secretary / Board of Directors – provide details of presence in RBI’s Defaulter and Wilful Defaulter Lists, SEBI Debarred List and CIBIL Score.
  6. Self-Certified Annual Returns of parent company.

How do I understand that my application is accepted?

Ans: Based on the initial scrutiny of the application, acknowledgment is issued by the Project Management Agency (PMA) appointed for this purpose by MeitY. However the acknowledgement of an application shall not be construed as approval under PLI Scheme.

Is the Manpower cost for R&D during investment period included for the purpose of Investment under PLI Scheme?

Ans: No

Do the expenditure incurred under Transfer of Technology (ToT), includes the cost amortised over the period of time or royalty paid over the period of time? Is there any percentage capping on capital expenditure incurred on ToT considered for determining eligible capital expenditure under the Scheme?

Ans: The Expenditure incurred on Transfer of Technology (ToT), only include cost of technology and initial technology purchase related to goods covered under Target Segments.

Do the expenditure incurred under Land and Building is covered under the Scheme?

Ans: No. The expenditure incurred on land and building (including factory building / construction) required for the project / unit is not covered under the Scheme and, therefore, will not be considered for determining eligibility under the Scheme.

What percentage of used / refurbished plant, machinery and equipment is considered as Investment under the Scheme and what are the other factors considered while importing or domestically procuring used / refurbished plant, machinery and equipment?

Ans: There is no restriction on the percentage of used / refurbished plant, machinery and equipment to be considered as Investment under the Scheme.

The used / refurbished plant, machinery and equipment allowed under the Scheme shall have a minimum residual life of at least 5 years as per Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016, amended vide Ministry of Environment, Forest and Climate Change Notification dated 11.06.2018. Further, a valuation certificate by a Chartered Engineer assessing the value and residual life shall also be required. In case of import, such valuation should be in accordance with Customs Valuation Rules and Circulars. The value of these plant, machinery and equipment shall be considered as lower of depreciated value (as per scale of depreciation fixed by Customs, whether these plant, machinery and equipment are imported or not) and the value assessed by Chartered Engineer (of India) or equivalent overseas chartered engineer.

Are the taxes and duties included in the expenditure are considered towards Investment in the Scheme?

Ans: All non-creditable taxes and duties would be included in such expenditure.

What is the Baseline for Investment and Sales of Manufactured Goods for Eligibility and Incentive?

Ans: The period for determination of baseline shall be as follows:

Baseline for Investment: As on 31.03.2020

Baseline for Sales of Manufactured Goods:

  1. First year i.e. FY 2020-21: Period from 01.08.2019 to 31.03.2020
  2. Second year onwards: Period from 01.04.2019 to 31.03.2020

What are the two threshold criteria for determining Eligibility under the Scheme?

Ans: The two threshold criteria are :

Incremental Investment over the base year and Incremental Sales of Manufactured Goods covered under Target Segment.

In order to meet the threshold criteria of Incremental Investment for any year, the cumulative value of investment done till such year (including the year under consideration) over the Base Year shall be considered.

In order to meet the threshold criteria of Incremental Sales of Manufactured Goods covered under Target Segments for any year, the Total Sales of Manufactured Goods covered under Target Segments for such year over the Base Year, irrespective of Invoice Value (whether below or above INR 15,000 in case of Mobile Phones) shall be considered.

Is the Eligibility under the Scheme depends on just these two threshold criteria?

Ans: Eligibility shall be subject to qualification criteria for applicants under different Target Segments in the Scheme are as defined:

For category Mobile Phones (Invoice Value INR 15,000 and above); Consolidated Global Manufacturing Revenue of the applicant (including its Group Companies), in the target segment, should be more than INR 10,000 Crore in the base year.

For category Mobile Phones (Domestic Companies); Consolidated Global Manufacturing Revenue of the applicant (including its Group Companies), in the target segment, should be more than INR 100 Crore in the base year. Applicants under this category can only be Domestic Companies as defined in Para 2.25.

Specified Electronic Components: Consolidated Global Manufacturing Revenue of the applicant (including its Group Companies), in the target segment, should be more than INR 50 Crore in the base year

How early an applicant may submit the claim for disbursements?

Ans: An applicant may submit a claim for disbursement of incentive as early as the end of the quarter in which the eligibility criteria for the year in consideration have been met. Claims for disbursement of incentive may be submitted only on a quarterly or half-yearly or annual basis. Claims for any period shall be made only once, unless withdrawn, and no subsequent part claims shall be allowed for the said period.

How will the annual ceiling on incentive payable to each applicant be determined?

Ans: Annual Ceiling on incentive payable to each applicant will be determined based on Financial Outlay as indicated in Para 8.1 of the Scheme and number of eligible applicants in each of the target segments. The annual financial outlay will be appropriated proportionately depending on number of applicants under each target segment. At the end of the year, any unappropriated incentive amount resulting from underperformance with respect to the prescribed annual ceiling on Net Incremental Sales, by any applicant(s) in any target segment, will be allocated to the remaining eligible applicants under such target segment who have achieved Net Incremental Sales in excess of the annual ceiling . Such incentive amount will be distributed only to the extent of excess performance by an applicant beyond the annual ceiling of net incremental sales of eligible product. If the incentive amount payable on cumulative excess performance by the applicants in a target segment is greater than the unappropriated incentive amount, then the sum of incentives payable beyond the ceiling amount for each applicant will be restricted to the unappropriated incentive amount for such target segment and such amount will be distributed among the overperforming applicants in proportion to their respective excess performance beyond the annual ceiling of Net Incremental Sales.

Illustratively, if there are five (5) eligible applicants under Mobile Phones(Invoice Value of INR 15,000 and above) target segment, the year-wise incentive ceiling per applicant will be 1/5th of the annual financial outlay for the said target segment. In case of underperformance by say 2 applicants, the unappropriated amount relating to these applicants will be allocated to the 3 remaining applicants in proportion to their performance in excess of the annual ceiling of Net Incremental Sales. Excess incentive payable to each of these 3 applicants will be capped to the lower of the following:

  • Incentive payable on excess performance beyond annual ceiling of net incremental sales at the eligible rate of incentive for such year.

OR

  • Share of unappropriated incentive amount, divided in proportion to the excess performance by the applicants over the annual ceiling of Net Incremental Sales for such applicants.

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