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India By State - Gujarat - Taxation & Legalities




Taxation & Legalities

Policies & Incentives

Agro Policy

Gujarat is keen to encourage investment in agro industries, agro infrastructure and hi-tech agriculture. The state government has taken up several agro-industrial projects for development and facilitation of infrastructure, marketing and research. The state's Agro Policy aims to create a world-class supply chain to facilitate transfer between the centres of cultivation and agro-processing zones. It proposes to encourage agro-research through institutes like Gujarat's Agriculture University.

The state has taken a number of measures to double its agro-processing capability. These include setting up food parks, agro-processing zones of international standards and agro-export zones to provide impetus to the export of perishables. It provides support to the cooperative industries private sector industries, apex and Agriculture Product Marketing Committees (APMCs) for setting up centres of Excellence. Besides this, it offers 25 per cent air freight subsidy on agro exports. For undertaking research and developmental activities, it provides up to 50 percent financial assistance. To develop large-scale cold storages, the state uses LNG available at Dahej and Hazira, which is more cost effective.

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Industrial Policy

Gujarat Industrial Policy introduced in 2003.

  • Aims to achieve sustainable industrial development
  • Makes the State more attractive to accelerate further the flow of investment in the Industrial sector
  • Proposes to promote IT and knowledge based industries
  • Enhanced exports from industrial units targeted
  • Encourages the development of small scale industries and service sector industries
  • Promotes industries in backward areas
  • Provides for assistance for Technology Up gradation Programme in specific industrial clusters
  • Assistance for activities like market development and promotion
  • Up gradation of entrepreneurial skill of first generation entrepreneurs to equip them to face challenges of new developments
  • Asset management fund introduced to cover debt and equity fund for financial assistance to infrastructure projects
  • Encourages setting up of private sector industrial parks such as employment intensive parks, bio-tech parks, IT parks, investment oriented parks and trade centres.
  • Provides to promote training institutions by large houses for IT, bio-technology, marine engineering, etc.
  • Supports Environmental Protection measures

Small Industries Policy

Gujarat is encouraging new industrial clusters and offering specialized facilities to business units. The State Government offers policy incentives to companies undergoing technology up gradation, modernization and expansion, and encourages linkages between industry and R&D centres. It also encourages quality certifications and patent registration by giving financial assistance for these activities.

Tourism Policy

  • Identifying and developing tourist destination and related activities
  • Diversifying tourism-related activities for attracting more tourists
  • Developing pilgrimage centres as tourist destinations
  • Creating adequate facilities for budget tourist
  • Strengthening present tourism - related infrastructure with opening of new centres Promoting accommodation projects, food oriented projects, entertainment projects, service oriented projects, etc.
  • Promoting tourism in the areas of religious and archaeology, heritage, wild life, coastal and beach, traditional art and craft based corporate, adventure, highway, etc.
  • Encouraging training facilities for developing a pool of human resources for tourism - related activities by private sector.

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Mineral Policy

Promotional policy for the minerals sector is essential keeping in view the process of globalization, economic liberalization and the prevailing trends of the world Trade Organization.

The Government of Gujarat has envisaged specific policy initiatives for industrial minerals occurring in the state to attract investment in the field of mineral exploration, exploitation, and mineral-based industries. It is intended to create competitive environment to speed up industrial development in mineral potential area by enhancement of Human Resource capabilities, improvement in infrastructure & adopting modern technology. The approach is to make progress by increasing mineral production and export of value added material through local and global competitiveness. Efforts to develop with special attention to minerals which are only available in the Gujarat as compared to other states in the country and mineral occurring in few states & having high quality. Creating local employment through mineral exploitation while maintaining mine safety & striking ecological equilibrium is also an additional addendum of this policy.

  • Lanning and building up adequate capacity in generation, transmission and distribution
  • Achieving optimum utilisation of existing equipments
  • Rationalising the tariff structure
  • Improving quality of services thereby achieving cost effectiveness
  • Striving for energy conservation

Encouraging power generation utilising non-conventional sources

Energy is the engine of growth for industries. The government has taken a number of steps to ensure cheap and regular supply of electricity for the industry.

Gujarat produces natural gas and definite plans have been made to utilize the gas for power generation. Out of five police stations proposed to be set up in as many zones in Gujarat Electricity Board (GEB) exclusively to check power theft, the first one has been set up at Rajkot. Campaign against power theft has been intensified. All job-oriented power production, transmission and distribution companies have been declared as essential services. The 'Gram Jyot' project to provide single-phase continuous electricity to villages with population of over 3,000 has been implemented.

Attention for maximum utilisation of new sources of energy, which can make Gujarat's future more prosperous. A gas policy has been framed for the development of Gas and Petroleum and distribution of Gas. Hazira and Dahej Terminals are being developed as the Gateway to Gas-based prosperity. A Special Economic Zone (SEZ) has been approved for Dahej.

A 1,500-km long gas-grid is being laid. Success has been achieved in striking underground gas reserves near Ahmedabad and other places. The crude oil rates have been fixed again after a gap of 30 years to the advantage of Gujarat.

Long-term plans have been prepared for utilisation of gas-based non-conventional sources of energy to meet the growing demand for electricity in the state and to reduce the cost of production.

The government has undertaken Kalpasar Project to generate electricity from tidal waves in the sea.

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Power Policy

To increase the generation and supply of power, the government of Gujarat has drafted its power policy according to which it envisages to utilize non conventional sources and conserve energy. Other measures to improve the production and supply of power are to improve the quality of services, de-monopolize distribution of power and encourage involvement of private partners, rationalize tariff structure and make the best possible use of the available energy sources.

  • Carry out planning and building up adequate capacity in generation, transmission and distribution
  • Achieve optimum utilisation of existing equipments
  • Rationalise tariff structure
  • Improve quality of services to achieve cost effectiveness
  • Strive for energy conservation
  • Encourage power generation by utilising non-conventional sources
  • De-monopolise distribution of power and invite involvement of private partners

IT Policy

  • Capital Subsidy at 25% for eligible new IT units on total eligible capital investment
  • Special incentives as capital subsidy to large units on graduated scale
  • Turnover incentive at 5% of eligible annual turnover with a ceiling of US$ 1.2 million
  • Incidence of Sales Tax on computer hardware and peripherals to be reduced
  • Connectivity incentive where government would subsidise leased line rental up to 500 km, to an extent of 50% of the lease rentals

Port Policy

  • Enhancing Gujarat's share in national EXIM sector
  • Decongesting of existing ports on the western coast through efficient services to support domestic and international trade
  • Providing port facilities to promote export oriented industries and port based industries entailing almost 50% of total industrial investment
  • Encouraging shipbuilding, ship repairing and manufacturing facilities for cranes, dredgers and floating crafts
  • Promoting coastal shipping for passengers and cargo traffic between various locations within and outside Gujarat
  • Supporting power plants by offering exclusive facilities for import of different power fuels
  • Encouraging private sector investment in minor and intermediate ports as well as new port locations

Road Policy

  • First state in India to have a law governing Built Own and Transfer (BOT) transaction
  • Impart connectivity to all villages by all-weather roads to improve quality of life in rural areas
  • Develop efficient road system to ensure smooth and uninterrupted flow of goods and passenger traffic
  • Constantly upgrade technology by inducting superior and quicker construction and maintenance methods
  • Induct scientific principles of resource allocation for maintenance and new construction programmes
  • Set high standards of road safety and travel comforts

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Doing Business in Gujarat

1. Approvals/Registration/Filing Information

Obtaining approvals

Key Approvals Required

Procedure Authority
SSI Registration District Industries Centre of the district where the unit is to be located
Letter of Permission For Automatic Approval: Development Commissioner
Food & Drug Manufacturing Sectors Commissionerate of FDA

Mining of Minerals

Project Located within 500m of a Coastline Commissionerate of Geology and Mining

2. Registration of Business Organization

Key Approvals Required

Type of Organization Authority
Sole Proprietorship No registration required
Partnership Registrar of partnership firms -Government of Gujarat
Corporation (PvT/Public Ltd) Registrar of Companies- Govt of India (office located in Gujarat)

3. Acquisition of Land

Key Approvals Required

Land Authority
In GIDC Estate Concerned Office of GIDC
Government Land Concerned District Collector or Collector/District Development Officer
Private Land (Purchase of Agricultural land for non-agricultural use) Deputy Collector
Non-Agricultural District Collector (urban area) District Development Officer (rural area)

4. Clearance from Pollution Control Board

Key Approvals Required

Applicability Authority
Recommendation of State Govt. for environmental clearance Forest and Environment Dept - Government of Gujarat
Central Regulation Zone Forest and Environment Dept - Government of Gujarat

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5. Arrangement of Power

Purpose

Authority

Sole Proprietorship sanction of Power Location Specific circle office of electricity company.
Captive Power Gujarat Electricity Regulatory Commission
Non-Conventional Sources of Energy Gujarat Energy Development Commission

6. Arrangement of Water

Location of Unit

Authority

In GIDC Estates Authority of concerned GIDC estate
Outside GIDC estates (for drawing canal/underground water) Commissionerate of Geology and Mining Government of Gujarat

7. Approval of Building Plans

Location of Unit

Authority

In GIDC Estates Executive Engineer (GIDC) of the concerned region
Outside GIDC Estates Local authority in charge of the area where the unit is to be established

8. Other Approvals

Applicability

Authority

Factory Registration Director of Industrial Safety and Health, Government of Gujarat
Boiler Registration Chief Inspectorate, Steam and Boiler, Government of Gujarat
Handling of Hazardous Items Director of Industrial Safety and Health, Government of Gujarat
Quality Certification Bureau of Indian Standards (office located in Gujarat)

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Cost of setting up business

An indicative table on cost of setting up business in Gujarat

Manufacturing

Land (US$ / hectare)* 95,312
Labour cost (US$ / man year)** 15,92.4

Services

Occupation Costs NA
(US$ / sq ft / year) --

Employee Cost (US$ / man year)***

Software developers 6,383
Team leads 14,893
Architects 21,276
Project managers 31,915

Common Heads

Cost of capital**** 10.57
(Prime lending rate, per cent) --

Electricity (US cents / kWh)***

Commercial 9.49
Industrial 9.29

Sales tax exemptions

The Gujarat Government gives tax concessions for investment in backward areas. For instance, the Government has announced exemptions for investment in the Kutch district.

Units with investment exceeding US$ 4.4 million will have no ceiling on the quantum of excise exemption. These can avail a 100 per cent exemption/deferment for investment in eligible fixed assets for different time periods depending on the investment range.

Investment range

Period of Exemption / Deferment

Up to US$ 2.2 million 5 Year
US$2.2- 11.1 million 7 Year
Above US$ 1 I million 10 Year

Source: Government of Gujarat Website

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More Information on Gujarat

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