Factor of Business Subsidy
Let’s know the next step of Subsidy Planning i.e Subsidy Factors. There are various factors which determined the subsidy amount and eligibility. In the absence of knowledge of Subsidy factors, we cannot make better subsidy planning.
1. Business Entity:
It is a very basic factor that has impact on subsidy amount. What the business Model you are going to opt such as Proprietorship Firm, A Partnership Firm or an LLP or A Private Limited Company or Farmer Producer Organization or Women Led Business Unit etc. shall be have impact on subsidy eligibility and quantum of subsidy amount.
For Example, you are going to plan the subsidy under PMEGP Scheme of Central Govt. and you have formed a Partnership Firm for carrying the proposed business. Then you will not be able to take subsidy under this scheme because this scheme is eligible for only Individual Applicant.
Further if the business is carried by a woman, then subsidy will be @35% of Total Project Cost else it will be @ 25%.
So before fix up the business model ensure that which model is more suitable to you in context of maximize the subsidy benefits. (Recommended to take services of Subsidy Viability Report)
2. Business Nature:
As we share earlier in our chapter of “Type of Subsidy” that there are some industry specific policy and scheme has framed by the Govt. So, it is advisable that being a business unit you should fix up the Exact Nature of Your Project. So that unit can avail the specific subsidy benefits.
For example, you are going to start a Bio Mass Pellets manufacturing plant. Hence the Nature of Project is a Waste to Energy Project. So accordingly, your project is entitled for the Capital Subsidy Scheme of Ministry of Renewal Energy of Govt. of India as well as Interest Subvention under Agriculture Infrastructure Fund implemented by the Department of Agriculture and Farmer Welfare of Govt. of India.
3. Business Site:
Site selection is also playing a very vital role in Business Subsidy Planning. Before going to finalize the business site, ensure that in which category or block such site is covered. Generally, in order to ascertain appropriate distribution of fiscal incentives, State has framed the categorization or Block system in the state and accordingly line up the subsidy scheme and incentives.
For Example, Haryana state has framed the Four Block Category named as Block A, Block B, Block C and Block D. Further Stamp Duty Refund scheme as notified by the Department of Industry has the provision of restriction to Block A for giving stamp duty refund on buying of land for business purpose in Block A notified area. So, if business units want to take the benefits of stamp duty refund, then it should not buy the land in Block A.
Further you should also consider the other factors connected to business site such as:
- Fall under NoC/CLU Zone as notified by State Govt. Policy
- Connected with Road (Specially measure the width of Road)/ Railhead
- Transportation and Public Accessibility
- Flood Zone
- Level of Land
- Industries Surrounded by such Land etc
Because above said factors also play prominent role at the time of applicability of subsidy scheme.
For Example, if you want take NABARD Subsidy for Construction of Warehouse then such land must be having public accessibility and connected with the Road else subsidy shall not be applicable on your project.
4. Govt. Policy:
Applicable Govt. Policy either State or Central has also played crucial role in Subsidy planning. So, you should be aware on applicable policy for the time being. Policies are implemented by various ministry and department thereof.
For example, you are going to set up a Warehouse for Agriculture Storage Purpose. Since your project is covered under Agriculture Infrastructure Fund, hence it is eligible for Interest Subsidy as well as Capital subsidy of NABARD. Here it is important for you that whether NABARD Policy for giving capital subsidy shall be in-force. Let’ assume as per notification of NABARD, capital subsidy shall be available for those persons who have taken first disbursement of their bank term loan on or before 31st March 2023.
And suppose, in your case 1st Disbursement shall made by banker on 2nd April 2023. So accordingly, your case shall not be eligible for claiming NABARD Subsidy irrespective of that your unit is coverable under said policy but since you have not met with the norms of said policy, hence you cannot take the benefit of capital subsidy.
So, here important point is that you need to ensure the Compliances of Govt. Policy norms at the time of initiating the project for taking timely benefits of subsidy.
So, it is recommended that you should make depth analysis of subsidy policy or should meet with a Good Business Subsidy Consultant for better Subsidy Planning.
5. Funding Pattern of Business:
Funding pattern or you can say that Investment mode in a business is also a decided factor of subsidy. How much amount of invested by the owner of a business unit and how much amount unit has availed as credit facilities from banker.
There are various incentives and subsidies are connected with Credit Linked (that we have already discussed in Chapter 2 – Type of Subsidy) such as Capital Subsidy, PMEGP Subsidy, Interest Subsidy, Credit Guarantee Cover etc. which are directly connected with Bank Term Loan.
There are various incentives and subsidies are connected with Credit Linked (that we have already discussed in Chapter 2 – Type of Subsidy) such as Capital Subsidy, PMEGP Subsidy, Interest Subsidy, Credit Guarantee Cover etc. which are directly connected with Bank Term Loan.
Sometime percentage of investment has also important to take the subsidy benefits. Generally, policies have a provision of Margin Money Ratio (Own Fund of Beneficiary) and Bank Loan Ratio. Let’s suppose, there is a provision that loan amount shall not be less than 60% of total project cost for taking the benefits of subsidy. But you have taken only 50% of Total Project Cost as Bank Loan. So, in this case you cannot take the advantage of subsidy irrespective of eligibility of your business unit for said subsidy.
So, for making a better subsidy planning you need to ensure the funding pattern in your project.
Further subsidy factors may be deviate as per the nature of project. So, we have shared herewith only basic subsidy factors that a businessmen need to take care at the time of making subsidy planning for their dreamed project.
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For, more information on this you are requested to contact our KIP subsidy helpline on Mail – sales@kipfinancial.com and contact Number- +918683898080
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