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India By State - Himachal Pradesh - Taxation & Legalities




Taxation & Legalities

Policies & Incentives

Industrial Policy

The Government has made several policy announcements in order to attract investments into the various sectors of the economy.

The state is keen to develop the traditional industries such a sericulture, handloom, handicrafts. In order to achieve this, the state plans to organize arts exhibitions to promote the products being manufactured by various industrial units. In order to promote the growth of small-scale industries in the state, the Government announced a rebate on the available rate of interest on loans from 13 % to 10.25 %.

The major is Industrial Policy, which has been formulated in order to boost the confidence of investors and catalyses industrial expansion in the state.

These basic objectives are:

  • Serve as a guideline for achieving the objective of uniform growth of industry and service sector throughout the State
  • Disperse industries and service sector activities
  • Facilitate generation of employment opportunities for local resource owners and stakeholders
  • Develop key infrastructural sectors like power, housing, social infrastructure development, human resource development and vocational education, so as to create a congenial investment climate for existing industry to grow as well as to attract further investments in the State
  • Clearly spell out the industrial incentives of fiscal nature
  • Specifically address the issues impeding industrial growth such as procedures for setting up of industry, obtaining permissions required under various labour laws, transportation of industrial produce, etc. so as to lay the foundation of strong and consistent growth of the industrial sector etc.

Biotechnology policy

It is another important policy. This aim is to set up sound biotechnology-based industries.

The main objectives are:

  • Upgrade infrastructural support to R&D Institutions to generate highly skilled human resource in biotechnology
  • Intensify R&D work in potential areas of biotechnology, including agriculture, animal husbandry, human health, etc
  • Conserve and commercially exploit bio resources of the State for sustainable development
  • Attract entrepreneurs for setting up of biotechnology based industries in the State
  • Promote diversified farming of high value cash crops, conservation and commercial exploitation of bio resources
  • Provide suitable institutional framework to achieve these objectives.

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Eco-tourism Policy

By 2011, Himachal Pradesh becomes a leading eco-tourism destination in the country. Indeed, the policy is to preserve and protect the natural heritage, both flora and fauna, in order to attract tourists and visitors to the state.

The state hopes to develop the tourism market providing opportunities to enhance livelihood of the local people and its resources through the creation of a special purpose vehicle (SPV). The state declared a 10 year tax holiday for entertainment units and deferred payment of luxury tax by hotels and tourism units. The Government encourages youth population to take up tourism as a profession.

They create wayside amenities along the highways and single window clearance for all tourism related projects. There is a Special incentive package for development of satellite towns and cyber cities with investment of over USD 21.5 million by NRIs and foreign investors.

Hence, the broad objectives of the policy are to:

  • Create appreciation, education and awareness of natural heritage of Himachal Pradesh
  • Enunciate mechanisms for partnerships in eco-tourism both with the local communities as well as private enterprise committed to the goals of eco- tourism
  • Identify and promote activities in tandem with the principles of community-based eco-tourism with the benefits accruing to the local community in terms of income as well as employment generation
  • Ensure safeguards from environment point of view to effectively regulate the eco-tourism activities in forest area
  • Generate resource through the Special Purpose Vehicle from the assets made available to it by the Forest Department, which would be used to create and maintain the assets
  • Create a cadre of personnel within and outside the Forest Department who are sensitive to the tenets of eco-tourism and can act as resource persons to further its cause
  • Actively coordinate with the tourism, fisheries, handicrafts, culture, HMI (Himalayan Mountaineering Institute) and other related departments to further the cause of eco-tourism
  • Actively promote the concept of homesteads in rural areas connected with eco-tourism so that the income accrues to the local people;
  • Implement CBET (Community Based Eco-Tourism) concepts with the involvement of local communities and voluntary organizations
  • Undertake sustainable public-private partnerships with regard to Government properties in the field of eco-tourism
  • Decongest the over-loaded tourist places so that the benefits of tourism are spread to rural areas etc.

Power Policy

Chief Minister said that the State Government was proposing to enhance the subsidy at a much higher scale from the existing provision of Rs. 100 crore to benefit the domestic, agriculture, horticulture sectors, government health and educational institutions for the first time besides BPL families, destitute homes and other eligible sections of the society. He said that the State was offering the lowest power tariff in the country in domestic and commercial sectors and had surplus power available and on full exploitation of entire hydel potential, the State would be in a position to meet its power demand for about 100 years to come.

Virbhadra Singh said that the State was very much concerned about the safety of its most valuable environment and ecology and while harnessing the hydel potential, there was a need to strike a balance, maintain the traditional riparian rights of the people, involve the developers in the process of local area development, ensure attractive relief and rehabilitation package, attractive land compensation, employment opportunities besides restoring the fragile ecology and environment and adequate resource mobilization for the State.

Chief Minister said that State Government was considering charging Rs. 10 lakhs per MW for projects above 100 MW from the developers and additionally, the State was also considering realization of royalty ranging from 12 to 30 percent and after 40 years, the project shall be reverting back to the State.

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IT Policy

This policy helps to entrepreneurship, boots exchanges with abroad, earnings and increases its contribution to the state domestic product. The state aims to improve social equity and justice through IT. The primary objectives of the policy are:

  • Accredited training institutions to be eligible to claim industry status, subject to norms
  • 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 five years from the date of commencement of commercial production
  • Creation of a venture capital fund of USD 5 million in association with SIDBI
  • Department of Information Technology (DoIT) acts as a single point of interface for setting up an IT unit in the state
  • Ensure continuous power supply treating IT as a continuous process industry
  • Exemption from land and building tax within the declared STP, IT habitats and hi-tech cities
  • IT software and IT services are deemed to be manufacturing activity to provide incentives for the industry in line with the approved policy of the Government of India
  • Provision of tax related incentives
  • Registered IT units within the declared software technology park (STP), IT habitats and hi-tech cities to be eligible for relaxation of FAR to the extent of 50 %
  • Special packages for investment proposals above USD 2.5 million or if the company is a Fortune 500 company
  • To encourage investment in the IT sector
  • To facilitate the establishment of IT institutes and improve the quality of IT education
  • To use IT tools to ensure a Simple, Moral, Accountable, Responsive and Transparent (SMART) government

The State Government has undertaken a number of initiatives to make available state-of-the-art facilities to further the growth of the IT industry. Some of the initiatives include:

  • A modern Software Technology Park and an earth station under the Software Technology Parks of India (STPI) at Shimla to provide an improved communications network
  • Around 174 acres of government land has been identified in Solan district for investment in the IT sector
  • Electricity tariff is being made available at industrial rates
  • Interest subsidy scheme is made applicable for computer hardware and software industries
  • IT is deemed as manufacturing activity to benefit from approved policy of the Government of India
  • Special incentive is being offered for investment of over USD 2.2 million, also being extended to a Fortune 500 company implementing the project
  • Special incentive package for mega projects, with investment exceeding USD 21.5 million.

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Doing Business in Himachal Pradesh

Obtaining approvals

An indicative list of approvals with timeframe for setting up business in Himachal Pradesh

List of approvals and clearances required

Departments to be consulted

Incorporation of the company Registrar of Companies
Registration, IEM, Industrial licenses PDIC** for SSI for large and medium industries
Allotment of land State DI***/ SIDC**** / Infrastructure Corporation
Permission for land use State DI, Department of Town and Country Planning
Site environmental approval State Pollution Control Board and Ministry of Environment and Forests
No Objection Certificate and consent under Water and Pollution Control Acts State Pollution Control Board
Approval of construction activity and building plan Town and Country Planning Authority
Sanction of power State Electricity Board
Registration under state's Sales Tax Act and Central and State Excise Act Sales Tax Department, Central and State Excise Departments

Estimated time taken (days)

The state has a Single Window Clearance Facility, which is the nodal agency responsible for obtaining all necessary clearances for an investment proposal. The committee, headed by the Chief Minister of the State clears all proposals within 30 days of submission.*

* Department of Industries, Government of Himachal Pradesh
** District Industry Centre
* Department of Industries
** State Industrial Development Corporations

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Cost of setting up business

An indicative table on cost of setting up business in Himachal Pradesh

Manufacturing

Land (US$ / hectare)* Bidding process
Labour Cost (US$ / man year)** 781

Services

Occupation Costs*** (US$ / sq ft / year) 2.54

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***** (Prime lending rate, per cent) 10.03**

Electricity (US cents / kWh)****

Metropolitan Area 4.99
Non Metro Area 4.99

Tax exemptions: 100 per cent outright excise duty exemption for a period of 10 years and 100 per cent income tax exemption for a period of 5 years.

* Land in Himachal Pradesh is sold in a bidding process.
** Source: Indiastat.com
* Source: Government Website
** KPMG Analysis on costing for an IT venture in India
** Government of Himachal Pradesh offers reduced lending rates to the industry
*** This is for SSI units in the state
**** Source: www.indiastat.com

Note: Exchange rate used is INR 47 per US$

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More Information on Himachal Pradesh

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