Major Incentives Under the Gujarat IT/ITeS Policy 2022-27

Posted by Written by Naina Bhardwaj Reading Time: 9 minutes

We list the various incentives announced under the Gujarat IT/ITeS Policy 2022-27, which aims to make Gujarat a leading IT hub in India. The Gujarat government has set an export target of INR 250 billion over the next five years and hopes to produce over 100,000 direct jobs as an outcome of its IT/ITeS Policy.

Gujarat IT/ITeS Policy 2022-27

Recently, the Gujarat state in India unveiled its new “IT/ITeS Policy 2022-27”, replacing the old IT & ITeS Policy 2016-21. The new policy offers both capital (CAPEX) and operational (OPEX) support to information technology (IT) firms making investments in Gujarat and promises to generate 100,000 direct jobs. Additionally, the new policy has also introduced a special employment generation incentive to encourage IT and IT-enabled services (ITeS) firms for hiring local talent.

The policy, which covers a five-year period until March 31, 2027, intends to place Gujarat among the top five performing states in India in the IT sector. Consequently, it intends to propel an eight-fold increase in IT exports from the state to reach INR 250 billion (US$3.28 billion), from the existing INR 31 billion (US$401 million).

Gujarat IT/ITeS Policy 2022-27 snapshot – key targets

The Gujarat IT/ITeS Policy 2022-27 intends to transform Gujarat’s IT landscape by enabling the build of world-class IT infrastructure, attracting highly skilled resources, and promoting innovation in emerging technologies.

Key Objectives and Targets of Gujarat’s IT/ITeS Policy 2022-27

Policy objectives

Policy targets

Act as a catalyst in the growth of the IT/ITeS ecosystem.

Place Gujarat among the top five performing Indian states in IT sector.

Establish Gujarat as a hub for innovation in emerging and advanced technologies.

Increase Gujarat’s annual IT exports from INR 31 billion to over INR 250 billion.

Encourage large-scale investment in the IT/ITeS sector through special provisions for mega IT/ITeS projects.

 

Become the national leader in terms of world-class IT infrastructure, data centers and innovation centers in emerging technologies.

Enable the stakeholders of the IT/ITeS sector to create state-of-the-art IT infrastructure in the form of ready to occupy co-working office spaces.

 

Generate more than 1,00,000 new IT/ITeS jobs in Gujarat.

Enable the creation of high-skilled IT human resources in Gujarat.

 

Key growth drivers of the policy include:

  • Incentives to develop IT City/Township to facilitate the “walk-to-work” culture.
  • Fostering research and development (R&D) in emerging technologies.
  • Establishment of an advanced research center (AI school as a center of excellence) as a special mega project.
  • Enabling cloud computing by encouraging technologically advanced data centers and supporting establishment of cable landing station (CLS).
  • CAPEX-OPEX model: A simplified model towards the scheme of assistance.
  • Fiscal incentives for skill upgradation courses for upskilling state-wide talent.
  • Enhancing digital literacy at grassroots level.
  • Special employment generation incentives for boosting local employment

Incentives offered under Gujarat IT/ITeS Policy 2022-27

CAPEX-OPEX Model

The various fiscal incentives described under this section fall under CAPEX and OPEX measures. A unique incentive structure is specifically designed to ease the complexity involved in claiming the fiscal incentives. Furthermore, these fiscal incentives are tailored as per the need of the various categories of projects/investments. The fiscal incentive support for IT/ITeS units are as follows:

Fiscal Incentives Under the CAPEX-OPEX Model

Investment category

Description of support

Category 1: Gross Fixed Capital Investment (GFCI) less than INR 2500 million

•     CAPEX support: All eligible IT/ITeS units are entitled to one-time CAPEX support of up to 25 percent of the eligible CAPEX expenditure, subject to a maximum ceiling of INR 500 million. The disbursement will be done in 20 equal quarterly installments.

•     OPEX support: All eligible IT/ITeS units are entitled to OPEX support of up to 15 percent of the annual eligible OPEX expenditure, subject to a maximum ceiling of INR 200 million per year for a period of five years from the date of eligibility. The disbursement will be done in quarterly installments.

Category II (mega projects) – GFCI more than or equal to INR 2500 million or project generating more than or equal to 2,000 direct IT employment on its payroll

•     CAPEX support: All eligible projects are entitled to one-time CAPEX support of up to 25 percent of the eligible CAPEX expenditure subject to a maximum ceiling of INR 2000 million. The disbursement will be done in 20 equal quarterly installments.

•     OPEX Support: All eligible projects are entitled to OPEX support of up to 15 per cent of the annual eligible OPEX expenditure, subject to a maximum ceiling of INR 400 million per year for a period of five years from the date of eligibility. The disbursement will be done in quarterly installments.

•     Early mover advantage: To stimulate growth in the sector, the Gujarat government has introduced a special provision in this Policy. Through this initiative, the government aims to provide strategic advantage to first movers in the IT/ITeS sector by relaxing the minimum investment criteria for mega projects. The first three (and only) eligible IT/ITeS projects with investment in GFCI of more than or equal to INR 1000 million will be considered as mega projects. Thereafter, the investment criteria will be increase to the specified minimum investment in GFCI of INR 2500 million

•     Enhanced incentive components: The High Powered Committee (HPC) may include other incentive categories or relax any of the conditions mentioned under this Policy based on the scale of investment, employment generation, high-value addition, and potential for attracting further investments. Such an incentive package will be tailored in consultation with the stakeholders involved. HPC will be the final decision-making authority in all such cases.

 

Special incentives for IT/ITeS units under Gujarat IT/ITeS Policy

Apart from the above-mentioned incentives, the Gujarat state government shall provide impetus to the growth of IT/ITeS units by incentivizing the major operational expenditure heads.

Special Incentives for IT/ITeS Units

Investment category

Description of support

Employment Generation Incentive (EGI)

Eligible IT/ITeS units shall be entitled to one-time support for every new and unique job created in Gujarat. It is applicable for new local employees hired and will be retained for a minimum period of one year at 50 percent of one month’s CTC up to INR 50,000 per male and INR 60,000 per female employee for eligible IT / ITeS units.

Note: The EGI assistance is tied to each individual IT employee and can only be claimed once for each individual IT employee in their lifetime. Therefore, if an IT/ITeS unit claims this incentive for any individual IT/ITeS employee, and thereafter the same individual IT/ITeS employee moves to another IT/ITeS unit, the subsequent IT/ITeS unit cannot claim the EGI assistance for the same. The applicable rules to implement the EGI assistance shall be formulated by the SLEC and released separately.

Interest assistance

Eligible IT/ITeS units will be entitled to interest subsidy at seven percent on term loan or the actual interest paid, whichever is lower with a ceiling of INR 10 million per annum. Such IT/ITeS units shall be able to claim this incentive on an annual basis for a maximum period of five years from the date of start of actual interest repayment .

Such eligible IT/ITeS units will be entitled to interest assistance on actual interest repayment (excluding principal repayment) on a term loan acquired from an Indian financial institution approved by the Reserve Bank of India (RBI) (excluding NBFC).

However, to avail this component, the loan shall be availed from the Indian branch of the Indian financial institution and the interest repayment period should begin during the operative period of the Policy

Atmanirbhar Gujarat Rojgar Sahay

Eligible IT/ITeS units will be eligible to claim reimbursement on the employer’s statutory contribution under Employees’ Provident Fund (EPF) made by them for their employees working in the offices situated within Gujarat for a period of five years. This reimbursement would be made subject to the following criteria:

•     100  percent  of  employer ‘ s  statutory contribution under EPF amount paid in case of female employees

•     75  per cent  of the  employer’s  statutory contribution under EPF amount paid in case of male employees

•     The ceiling of incentive amount per employee will be 12 percent of the employee’s basic salary plus applicable Dearness Allowance (DA) and retaining allowance

•     For eligible expansion units, the assistance will be available  for   incremental  employee   count beyond the count that existed before undertaking expansion, occurring during the Policy period for a period of five years for each of such projects. For this purpose, the average employee count of the previous year before the commencement of operations from new set- up/expansion shall be treated as base employee count and incremental count, which will be computed over such base count,  happening every year during the Policy period shall be entitled to such benefit for the duration of five years.

Electricity Duty Incentive (EDI)

Eligible IT/ITeS units can claim the entire amount of electricity duty paid by them to the Gujarat state government for a period of five years from the date of start of commercial operations or in-principle approval, whichever is later.

Incentive for supporting “work-from-home”

The Gujarat state government shall support the eligible IT/ITeS units with Gujarat-based employees in availing the “work-from-home” option when such employees operate from within Gujarat. Such eligible IT/ITeS units can avail EGI and Atmanirbhar Gujarat Rojgar Sahay for all such employees. Such benefits will be available for incremental employees only.

Incentives for development of IT City/Township

The Gujarat state government intends to develop a dedicated state-of-the-art IT township or IT city that will have all the modern amenities in line with the prevailing global standards. The government shall incentivize the developer/consortium of developers for the creation of such IT township or city through following sops:

Fiscal Incentives for Development of IT City/Township

Incentive category

Description of support

CAPEX Support

All  eligible  applicants  are  entitled to  one-time  CAPEX support  of  up  to  25  percent  of  the  eligible  CAPEX expenditure, subject to a maximum ceiling of INR 1000 million. Such  support  shall  be  provided  as  a  reimbursement towards actual expenditure incurred for creating IT office space  (co-working space,  IT/ITeS  park)  in the  IT city/ township.

The disbursement  will be done in 20 equal quarterly installments.

 

Non-Fiscal Incentives for Development of IT City/Township

Relaxation in zoning and land use laws, such as permission for mixed land use (residential, commercial and industrial)

Assistance in obtaining other necessary statutory clearances

Relaxation in Floor Space Index (FSI) norms for IT office space

Doorstep support for utilities/infrastructure

Infrastructure facilitation under the new Gujarat IT/ITeS Policy

The Gujarat state government shall provide impetus to the IT ecosystem by supporting the development of ready to occupy co-working spaces at an easy-to-commute location to allow IT/ITeS units to immediately start their operations within the state. The state government aims to achieve this objective by implementing the following models:

Government-facilitated model

The Gujarat government envisages building/leasing state-of-the-art co-working IT office spaces on PPP/EPC mode with modern interiors, high-speed internet connection, and other services and facilities as per prevailing industry standards .

Empanelment model

The Gujarat government shall empanel state-of-the-art co-working IT office spaces that are run by private companies/developers.

The eligible IT/ITeS units opting to start their operations in co-working IT office spaces under the government facilitated/empanelment model shall be eligible for the following fiscal support for a period of five years from the date of start of commercial operations or in-principle approval, whichever is later:

Fiscal Support to IT/ITeS Units Under Empanelment Model

Monthly rental support to IT/ ITeS units (per seat basis)

 

Period

Fiscal incentive limit per seat per month (INR)

50 percent of monthly rental

First two years

10,000

25 percent of monthly rental

Three to five years

5,000

Incentives for development of cloud ecosystem

Incentives for Establishment of Cable Landing Station (CLS)

Incentive category

Description of support

CAPEX Support

One-time CAPEX support of up to 25 percent of the eligible CAPEX expenditure subject to a maximum ceiling of INR 200 million. The disbursement will be done in 20 equal quarterly installments.

Note: Only expenditure incurred on civil works for constructing the building of CLS along with network hardware (excluding expenditure towards cable laying and network cables) shall be admissible under GFCI.

OPEX Support

Power tariff subsidy of INR 1/unit for a period of five years

 

 Incentives for Establishment of Data Centers

Incentive category

Description of support

CAPEX Support

All eligible Data Centers are entitled to one-time CAPEX support of up to 25 percent of the eligible CAPEX expenditure subject to a maximum ceiling of INR 150 Cr. The disbursement will be done in twenty (20) equal quarterly  installments.

OPEX Support

Power tariff subsidy of INR 1/unit for a period of five years

Impetus to research and development

Fiscal Incentives to Support R&D under Gujarat IT/ITeS Policy

Incentive category

Description of support

Support to R&D institutes/R&D Centers established by educational institutes recognized by AICTE

All eligible R&D institutes can avail one-time CAPEX support for the purchase of equipment for setting up of R&D Center/laboratory at 60 percent of the cost for machinery and equipment, hardware and software (COTS/license) required for research for the R&D activities subject to a maximum of INR 50 million, provided that the R&D institute is acknowledged by Council of Scientific & Industrial Research (CSIR) I Department of Scientific and Industrial Research (DSIR) for conducting research into the desired field.

 

Non-Fiscal Incentives to Support R&D

Incentive category

Description of support

Facilitation of land allotment

The Gujarat state government will duly facilitate the allotment of land for eligible projects in the state. Such allotment shall be subject to availability and the fulfillment of eligibility criteria as determined by the state government from time to time.

Self-certification

IT/ITeS units will be allowed to self-certify without the inspections under the acts, such as Factory Act, Maternity Act, Minimum Wages Act., etc., barring complaints and random spot checks by the relevant authorities.

Investor Facilitation Center

•     Include the industry players of Gujarat on a common platform to link all types of industries

•     A centralized helpdesk call center on a 24×7 basis will be developed for query management

•     Central platform for connecting investors with stakeholders (government nodal agencies/financial institutions)

•     Assist in marketing/promotion of IT/ITeS services of companies/stakeholders

•     Ensuring effective implementation of the Policy

•     Facilitating platform for enabling knowledge exchange between registered IT/ITeS units/stakeholders

•     Facilitating access to government sector for opening new market opportunities for IT/ITeS service providers

Preferential market access

The state government will offer unique opportunities to the IT/ITeS units registered in Gujarat, to tap into the government market by way of encouraging Gujarat- based companies of the IT/ITeS sector to take part in public tenders for government-owned/funded projects for the procurement of IT products and services as per the discretion of the respective government departments and the prevailing procurement Policy of the Gujarat state government, as amended from time to time

 


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