from India Tax & Regulatory Services
Government releases notification for incentive schemes for electronic products/ components - PLI and
SPECS
April 02, 2020
In brief
The Ministry of Electronics and Information Technology (MeitY) has notified1 the following two schemes on 1 April 2020:
1. Production Linked Incentive Scheme (PLI), which provides incentives to companies registered in India, subject to eligibility thresholds, target segments, etc., in order to boost large-scale electronic manufacturing.
2. Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), which aims to address the disabilities faced by manufacturers of components and semiconductors by offering capital subsidy of 25%.
In detail
A. PLI scheme
The PLI scheme will provide an incentive of 4% to 6% on incremental sales to any
company registered in India and manufacturing goods covered under target segments.
The total budgetary outlay of the proposed scheme is approximately INR 40,951
crore.
The below table summarises the main aspects of the guidelines:
S. No. Focus Area Provision
1 Quantum of
incentives The PLI provides an incentive of 4% to 6% on incremental sales (over base year) for goods manufactured in India.
2 Target segments Mobile Phones.
Specified Electronic Components –
- Surface-Mount Technology components;
- Discrete semiconductor devices including transistors, diodes, thyristors, etc.;
- Passive components including resistors, capacitors, etc. for electronic applications;
- Printed Circuit Boards (PCB), PCB laminates, prepregs, photopolymer films, PCB printing inks;
1PLI scheme – Notification no. CG-DL-E-01042020-218990 dated 1 April 2020 and SPECS scheme – Notification no. CG-DL- E-01042020-218992 dated 1 April 2020
2 pwc - Sensors, transducers, actuators, crystals for electronic applications;
- System in Package (SIP);
- Micro/ Nano-electronic components, such as Micro Electromechanical Systems (MEMS) and Nano Electromechanical Systems (NEMS);
- Assembly, Testing, Marking and Packaging (ATMP) units.
3 Tenure Applications shall be accepted by MeitY till 31 July 2020, i.e. four months from the date of notification of the PLI scheme.
Incentives under the PLI scheme shall be available for five years subsequent to base year.
4 Basic eligibility criteria
Company registered in India and engaged in manufacturing (including contract manufacturers) of target segments in India.
Threshold criteria for Incremental Investment and Incremental Sales of Manufactured Goods (covered under Target Segments) details mentioned below*
Target Segment Proposed incentive rate
Minimum incremental investment over base year (in INR crore)
Incremental sales of manufactured goods over base year (in INR crore) Mobile phones (Invoice
value of INR 15,000 and above)
Year 1: 6%
Year 2:6%
Year 3: 5%
Year 4: 5%
Year 5: 4%
INR 1,000 crore over 4 years Year 1: 250 Year 2: 500 Year 3: 750 Year 4: 1,000
Year 1: 4,000 Year 2: 8,000 Year 3: 15,000 Year 4: 20,000 Year 5: 25,000
Mobile Phones
(domestic companies)*
INR 200 crore over 4 years Year 1: 50 Year 2: 100 Year 3: 150 Year 4: 200
Year 1: 500 Year 2: 1,000 Year 3: 2,000 Year 4: 3,500 Year 5: 5,000
Specified electronic components
INR 100 crore over 4 years Year 1: 25 Year 2: 50 Year 3: 75 Year 4: 100
Year 1: 100 Year 2: 200 Year 3: 300 Year 4: 450 Year 5: 600
5 Domestic Company* Domestic companies shall be defined as those owned by resident Indian citizens as defined in the Foreign Direct Investment Policy Circular of 2017. A company is considered as “owned” by resident Indian citizens if more than 50% of the capital in it is beneficially owned by resident Indian citizens and/ or Indian companies, which are ultimately owned and controlled by resident Indian citizens.
6 Base year for computation of incremental investment and
Financial year 2019-20
S. No. Focus Area Provision incremental sales of
manufactured goods
7 Nodal Agency The PLI scheme shall be implemented through Project Management Agency (PMA), which will act as the Nodal agency. PMA will be responsible for receipt, examination and appraisal of applications, verification of claims, and making recommendations to the Empowered Committee (EC) for approval.
8 EC EC shall consist of the CEO NITI Aayog, Secretary Economic Affairs, Secretary Expenditure, Secretary MeitY, Secretary Revenue, Secretary DPIIT and DGFT. The primary role of EC shall be as follows:
Consider recommendations made by the PMA for approval under the PLI scheme.
Consider disbursement claims as examined and recommended by PMA.
Conduct a periodic review of eligible companies’ investments, employment generation, production and value addition.
May revise incentive rates, ceilings, target segments and eligibility criteria during the tenure of the PLI scheme.
B. SPECS scheme
S. No. Focus Area Provision
1 Quantum of
incentives
Reimbursement of 25% of capital expenditure for manufacturing of goods mentioned below.
2 Eligible list of goods and minimum investment threshold
A. Investment threshold limit of INR 5 crore
SMT Components including light emitting diode (LED) chips.
Chip Modules for Smart Cards, RFDI Antenna and Labels, CoB/ System in Package.
Passive components including resistors, capacitors, ferrites, etc. for electronic applications.
Electromechanical components including transformers, inductors, coils, relays, switches, micro motors, stepper motors, BLDC Motors, Connectors, Heat Sinks, Antenna, Speakers, Microphones, etc. for electronic applications.
Magnetrons, wave guides, circulators, couplers, isolators, filters, magnets, RF components for electronic applications.
Printed circuit boards (PCBs, PCB Laminates, Prepegs, Photopolymer films, PCB printing inks; printed flexible electronics.
Sensors, transducers, actuators and crystals for electronic applications.
Camera modules, vibrator motor/ ringer.
USB/ data cables, HDMI cables.
Capital goods for all the goods covered under SPECS.
B. Investment threshold limit of INR 15 crore
Active components:
- Discrete semiconductor devices including transistors, diodes, etc.
- Power semiconductors including FETs, MOSFETs, Thyristors, etc.
Preform of silica and optical fibre.
Display assembly and touch panel/ cover glass assembly.
4 pwc C. Investment threshold limit of INR 25 crore
Micro/ nano-electronic components such as MEMS and NEMS.
Assembly, Testing, Marking and Packaging (ATMP units).
D. Investment threshold limit of INR 75 crores
Mechanics (plastic and metal parts) for electronic applications.
E. Investment Threshold Limit of INR 250 crore
Compound semiconductors such as GaN, SiC, GaAs, etc. and silicon photonics devices/ integrated circuits, optoelectronic components.
F. Investment threshold limit of INR 500 crore
Semiconductor wafers
G. Investment threshold limit of INR 1,000 crore
Semiconductor integrated chips (ICs) including Logic [microprocessor,
microcontrollers, digital signal processors (DSP), application specific integrated circuits, etc.]; memory; analogue/ mixed signal ICs, etc.
Display fabrication units including liquid crystal displays, LED, Organic LED, etc. for electronic applications.
3 Eligible capital expenditure
Plant, machinery, equipment, associated utilities and technology, including for research and development
20% of capital expenditure pertaining to refurbished plant, machinery and equipment (imported or domestically procured) will be eligible expenditure.
4 Tenure Application window will initially be open for three years from date of notification.
Investments made within five years from date of acknowledgment of the application shall be eligible for incentives.
5 Other key conditions for approval/
disbursement
Investments made for setting up of new units as well as expansion of capacity/
modernisation and diversification of existing units are covered under the SPECS scheme.
Single phase applications will be considered under the SPECS scheme unlike the earlier M-SIPS scheme where multi-phase application was allowed.
Applicant may make multiple applications for one or multiple locations.
Unit will need to remain in commercial production for a period of at least three years from the date of commencement of production or one year from the date of receipt of last incentive, whichever is later.
Disbursement claims may be filed on six-month basis after the first disbursement.
Applicant shall be eligible to take benefit under any scheme of Government of India except M-SIPS scheme for which investment has been committed and incentives have been claimed.
State incentives, if any, shall be over and above the incentives under the SPECS scheme.
6 Implementation
Agency
PMA
Shall act as nodal agency and will be responsible for providing secretarial, managerial and implementation support.
S. No. Focus Area Provision
Shall appraise application, examine disbursement claims and place the application in Executive Committee meeting
Executive Committee
Chaired by an officer not below the rank of Joint Secretary in MeitY.
Executive Committee will make recommendations to PMA for approval/
rejection/ modification of the applications.
Governing Council
To be chaired by Secretary, MeitY with members comprising experts from the Government and industry.
Shall conduct periodic review of progress of the SPECS scheme.
The takeaways
The PLI scheme aims to boost domestic manufacturing while also attracting large
investments in mobile phone manufacturing and specified electronic components, including ATMP units. Since the application window is four months from 1 April 2020, it will be beneficial for applicants to apply under the PLI scheme at the earliest. Further,
detailed guidelines would shed light on eligible heads of investment to determine eligibility under the PLI scheme.
The SPECS scheme is expected to create an indigenous manufacturing eco-system for electronic components and semiconductors in the country.
The appraisal and
disbursement guidelines will be elaborated in this scheme
guidelines to be issued by MeitY separately. Applicants may start evaluating the benefits available that would ultimately reduce the cost of investment of proposed set up.
Let’s talk
For a deeper discussion of how this issue might affect your business, please contact your local PwC advisor
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