IT & ITES News

Maharashtra IT/ ITES Policy 2015 –



To print this article, all you need is to be registered or login on Mondaq.com.

Maharashtra announced its first Information Technology Policy in
1998, which was followed by the Information Technology and
Information Technology Enabled Services (IT/ITES)
Policy-2003 and IT/ITES Policy-2009, to give a boost to the growth
of Information Technology sector and thereby generate employment
and improve the quality of life. As a result of experiences gained
from the implementation of earlier IT/ITES Policies and due to the
rampant development in the field of IT/ITES, Maharashtra Government
formulated a new policy to boost the industrial sector in the state
– the IT/ITES Policy 20151 on
August 25, 2015 (IT/ITES Policy 2015).

The IT/ITES Policy 2015 aimed to make Maharashtra the economic
magnet of India and the most preferred investment destination of
the country. The said IT/ITES Policy 2015 aimed to accelerate
investment flow to industrially backward areas of the state, create
more and more employment opportunities, and achieve higher level of
expert turnover resulting in enhanced productivity and augmentation
of Gross State Domestic Product (GSDP).

In this article, we would like to discuss the eligibility
criteria for a company’s office unit to be classified as an
IT/ITES unit, the procedure and the fiscal benefits of obtaining an
IT/ITES registration. We also aim at clarifying doubts regarding
the meaning of ‘Information Technology Enabled Services’
and whether a company engaged in manufacturing and other services
can be eligible for an IT/ITES registration.

Eligibility Criteria for IT/ITES registration

Before we understand the eligibility criteria, it is important
to note that the IT/ITES registration is granted for an office unit
of the company and not for the entire company as a whole. For any
office unit to obtain the IT/ITES unit, it needs to fulfil two
criteria: (i) the business activities of the office unit should
fall under the definition of the terms “IT/IT enabled
Services” as provided under the IT/ITES Policy 2015; and (ii)
75% of the total turnover of the office unit should be generated
from these IT/ IT enabled Services.

Under the IT/ITES Policy 2015, IT industry consists of IT
software, IT hardware and IT Enabled services, which are defined
under Paragraph 4 of the IT/ITES Policy 2015 as follows:

“(i) IT Software: IT Software
is defined as any representation of instruction, data, sound or
image, including source code or object code, recorded in machine
readable form and capable of being manipulated to providing
interactivity to a user with the means of a computer.

(ii) IT Hardware: IT Hardware
covers products as notified by Directorate of Industries from time
to time. An indicative list is at Schedule A.

(iii) IT enabled Services (ITES):
IT enabled services will be as specified by the Central Board
of Direct Taxes (CBDT) under Rule 10A of the Income Tax Rules from
time to time and are as below:

  • Back-office Operations;

  • Call Centres or Contact Centre
    Services;

  • Content Development or
    Animation;

  • Data Processing or data
    mining;

  • Engineering and Design;

  • Geographic Information System
    Services;

  • Human Resource
    Services;

  • Insurance Claim
    Processing;

  • Legal Databases;

  • Creation and maintenance of
    Medical Transcription excluding advise;

  • Payroll;

  • Remote Maintenance;

  • Revenue Accounting;

  • Support Centres;

  • Website Services;

  • Translation Services;

  • Data Search integration &
    analysis;

  • Remote Education excluding
    education content development;

  • Clinical database
    Management-Services excluding clinical trials, but does not include
    any research and development services whether or not in the nature
    of contract research and development services.”

Thus, we can see that the IT/ITES Policy 2015 has provided a
broad definition of the term “IT enabled Services”. In
order to further clarify the meaning of “Back Office
Operations”, one of the activities falling under the
definition of “IT enabled Services”, the Government of
Maharashtra issued a resolution2
dated 22nd February 2016 (Resolution
2016
). The said Resolution 2016 defined “Back Office
Operations” to mean the administrative and support staff of a
financial institute; or any department or office that is not
usually seen by the outsiders, which is responsible for function
related to running of the company such as settlements, compliance,
accounting, IT and other technology. The Resolution 2016 also
recognised that back office functions may be outsourced to external
companies and/or in different companies which includes, to name a
few: business process outsources services provided mainly with the
assistance or use of information; data entry, transcription,
reconciliation, consolidation, co-ordination, proportion,
processing review of documents; accounting to reporting,
reconciliations; financial back office operations; computer/
disaster recovery; IT operations; financial and administrative
support. The Government of Maharashtra further clarified in
December 2016 that “Back Office Operations” do not
include delivery godowns or warehouse of e-commerce companies.3

It is also important to note that the Resolution 2016 also
includes back offices of manufacturing and other service, start
ups/ companies within the definition of “Back Office
Operations”. It further qualifies that these back offices
should not have direct customer interface but provide essential
support through electronic media. Thus, the office unit of a
company in engaged in manufacturing or other services may be
eligible for ITES registration in case it is carrying out back
office operations or other IT enabled services as defined under the
IT/ITES Policy 2015.

Procedure for obtaining IT/ITES Registration

The initial ITES registration is called as Letter of Intent
(LOI) and the same is issued by the Director of
Industries (DOI), Government of Maharashtra for a
new office unit. However, before obtaining LOI, the first step is
to obtain an Industrial Entrepreneurs Memorandum Part-A
(IEM Part-A) for the office unit from the
Government of India, Secretariat for Industrial Assistance
(SIA), Department of Industrial Policy and
Promotion, Ministry of Industry, New Delhi, in case the investment
in equipment of the proposed office unit exceeds INR 5 Crore. In
case the investment in equipment of the proposed office unit is
less than INR 5 Crore, the first step would be to obtain Udyog
Aadhaar Memorandum from the Government of India, Ministry of Micro,
Small and Medium Enterprises.

Once the IEM Part-A or Udyog Aadhaar Memorandum is received, an
application in the prescribed form together with the requisite
documents has to be submitted to the concerned DOI who in turn
issues the LOI. The LOI issued is valid for a period of 3 years
from the date of issuance, during which period the proposed office
unit needs to commence the business.

Before expiry of the said period of 3 years, an application has
to be made to SIA, New Delhi, for obtaining IEM Part-B. However,
IEM Part-B needs to be obtained by only those office units where
the investment in equipment of the proposed office unit exceeds INR
5 Crore. Once the IEM Part-B is received, an application together
with the prescribed documents has to be made to DOI for obtaining
ITES registration. The ITES registration is valid for a period of 3
years and needs to be renewed thereafter.

Fiscal Benefits offered to the IT/ITES units

One of the major benefits to IT/ITES units is that they can take
offices premises in an IT Park which has much lower rental charges
as compared to other commercial premises. Some of the other fiscal
benefits provided under the IT/ITES Policy 2015 include[4]:

  1. 75% stamp duty exemption for taking a
    premises on leave and license;

  2. Exemption from payment of electricity
    duty for a certain time period;

  3. Subsidized electricity tariff;

  4. Power tariff subsidy for 3 years @
    INR 1 per unit consumed from the date of registration with the DOI
    after commencement of IT/ITES activity or equal to the investment
    made in IT Hardware on the date of registration of the unit;

  5. Property tax to be levied at par with
    residential rates as applicable in the relevant jurisdictions;

  6. Permission would be granted to set-up
    IT/ITES unit (except for IT hardware and Telecom hardware
    Manufacturing Units) in any zone (including residential and
    no-development zones etc.); and

  7. ‘Continuous Industry Status’
    to be granted to IT/ITES unit which means they will be permitted to
    work 24x7x365 days without any close down except in case of
    exigencies.

Conclusion

Before an office unit decides to obtain an IT/ITES registration
it is important for the office unit to make a list of activities
that may fall under the definition of “IT/ITES” under the
IT/ITES Policy 2015 and check the percentage of revenue that is
generated from those activities. It is also important to keep in
mind that even if a Company as a whole may be in manufacturing or
other services, its office unit may be eligible for ITES
registration in case it fulfils the criteria laid down under the
IT/ITES Policy 2015.

Assisted by Ms. Aditi Chandra, a student of Third
Year B.B.A., LL.B. (Hons.) studying in Chanakya National Law
University (CNLU), Patna.

Footnotes

1 IT/ITES Policy 2015 issued by
Government of Maharashtra Industry, Energy and Labour Department
vide GR No. ITP-2013/CR-265/Ind-2, dated 25th August
2015.

2 GR No. ITP-2015/Case No.
207/Ind-2, dated 22nd February 2016 issued by Government
of Maharashtra Industry, Energy and Labour Department.

3 GR No. ITP-2016/Case No.
200/Ind-2, dated 27th December 2016 issued by Government
of Maharashtra Industry, Energy and Labour Department.

4 Paragraph 5 (B), the IT/ITES
Policy 2015 issued by Government of Maharashtra Industry, Energy
and Labour Department vide GR No. ITP-2013/CR-265/Ind-2, dated
25th August 2015.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



Source link