How To Manage Subsidy Documentation
Dear Businessman,
Subsidy Planning is a very important topic for your business, and in this series, we will discuss and share information with you. The topic for discussion is Subsidy documentation. Yes, Many Businessmen are unable to do Subsidy Planning because they don’t have the required documents to claim the subsidy. Or you could say that when they are setting up their business, such documents are either missed or misplaced, which are necessary for claiming subsidies.
Considering this point of view, We will share detailed information with you about Business Subsidy Documents:-
1 Reflecting On Paper : Whenever You Plan a Project, initiate a business, take a loan from a Bank, or do anything related to the Business, keep in mind that you need to prepare the documents related to the business very carefully and take care of them. You must store them securely because when you claim the subsidy, these papers will be very useful.
2 Create a Legal Entity : Whether You are doing Business under a Proprietorship Model, Partnership, Company, or LLP (Limited Liability Partnership).
3 Company Registration : Whenever You Register a Business, The Documents, Whether it is GST registration, MSME registration, Haryana Udyam Memorandum registration, or any State-Specific Registration, or your company incorporation under the Companies Act, or LLP or Partnership Firm, you must have the documents for the Firm’s Registration.
4 Or if you are an FPO (Farmer Producer Organization) or a Startup Registered Unit, you need to have the Startup Registration Documents.
5 If you are working in Import-Export, you must have the Import-Export Code.
6 Select a Site : If you have purchased land, the land purchase documents, such as the title deed (also known as the sales deed), are required.
- The revenue records of the land, such as Jamabandi, Sijra, or Intkal, or any other state-specific terminology used in the state’s revenue records for land documentation, should be taken into account.
- The entire chain of ownership from the time of purchase should be well-documented, as these records assist in obtaining loans and determining the status of the land.
- If You Are planning to set up in a Specific Industrial Area or Government-Specified Zone, The Allotment Letter from the Authorities must clearly identify that this Land is for your Business, whether you Purchased it or, if it’s on lease, the Lease Deed Agreement must be Duly Stamped and Registered with the Appropriate Authority. The Duration of the lease is also important to consider.
- There Are Many Subsidy Benefits connected to the Location of your Site, such as Block Categorization or Special Economic Zones (SEZ), and the Government provides specific benefits linked to the site. Therefore, when selecting a Site for your Business, you must carefully prepare the Site-Related Documents.
Importance of a DPR for Loans and Subsidies :
- When We talk about initiating a business, we use both our own funds and bank loans. For this, We Prepare a Project Report, also known as a Detailed Project Report (DPR), a Business Plan, or a Financial Feasibility report. This report is a highly important document, particularly for availing Bank Loans and Government Subsidies.
- When it comes to Government Subsidies that are linked with Banking Credits, or any Allied Subsidy Benefits that apply To New Businesses, The Department will often require a Project Report. Therefore, whenever you initiate a business, the Project Report becomes an essential document, as it directly impacts your Subsidy, Bank Loan, and any schemes of the ministries requiring prior approval.
- The Detailed Project Report (DPR) should be prepared in such a way that it is useful both for Bank Loans and for Claiming Subsidy Benefits. When Claiming Subsidies, the Project Report is the first document to be examined, covering aspects such as Fixed Capital Investments—how much has been Allocated for Building, Plant And Machinery, Working Capital, your Own Margin Money, how much Bank Facility you are availing in the form of term Loans or Cash Credit (CC) limits, your Projected Cash Flow, Revenues, and Details of the Product. All these aspects are covered in the Financial Feasibility and the Project Report.
Documenting Promoter Contribution for Loans and Subsidies :
The Next Step After Framing The Project Report is when you apply for a Bank Loan.
Here, Two Important Aspects come into play: the Bank’s Money and your Own Money.
- As a Promoter, when you contribute your own Funds as Margin Money, keep the Proper Documentation because Many Schemes have provisions specifying how much of the promoter’s contribution should be there. How will you certify this? Whenever you work with Banking Partners, whether as a Director or Proprietor, ensure that the Bank Accounts Linked to your Proprietorship Firm reflect all transactions clearly. Identify and Maintain Proper Records of your funds, so that your contribution as a promoter is easily recognized. This is directly linked to Subsidy Benefits.
- When you receive a Bank Loan, there are several documents connected with the loan. Banks prepare Appraisal Notes based on inspections of your site, and after that, they issue a loan sanction letter. The Bank Loan Sanction Letter and Account Statements must clearly mention the terms of the Loan. In some cases, it may be necessary to include a Subsidy Clause in the Sanction Letter, as many loans are linked with Subsidy Norms. For instance, your loan might fall under the Agriculture Sector, Priority Sector Lending, or MSME Lending. Therefore, when applying for a Bank Loan, ensure that your Sanction Letter is aligned with the required norms and includes all necessary details related to Subsidy.
Key Documentation Tips for Maximizing Subsidy Claims :
When claiming subsidies, it’s crucial to manage and maintain all necessary documentation meticulously. Here’s a summary of the key points:
1. Document Management: Properly handle tax invoices and payment receipts for all your expenditures. For example, if you’re purchasing technical equipment, testing tools, or environmental control devices, make sure the invoices clearly specify the items and their technical descriptions. This will help in justifying your expenses when claiming subsidies.
2. Statutory Approvals: Obtain all necessary statutory approvals like NOCs (No Objection Certificates), CLUs (Change of Land Use), fire safety clearances, pollution control certificates, and any other required registrations. Proper documentation of these approvals is vital as they play a significant role in the subsidy claiming process.
3. Fixed Capital Expenditure: Ensure that all fixed capital expenditures, including civil work, building materials, and plant machinery, are documented with accurate invoices and purchase bills. These expenses should be properly justified and documented to avoid any reduction in subsidy claims.
4. Bank Documentation: Keep detailed records of bank transactions, including loan documents, sanction letters, and appraisal notes. This documentation should align with the subsidy norms and requirements to avoid any issues during subsidy claims.
5. First Sale Bill: After your production begins, the first sale bill is an essential document. It’s used to determine the time frame for claiming subsidies post-commencement of production. Ensure that all your books of accounts are in order before issuing the first sale bill to avoid delays or rejections in subsidy claims.
6. Consultation with Subsidy Experts: Engage with a qualified subsidy consultant to prepare and manage your subsidy claims effectively. A consultant can help you frame a comprehensive subsidy validity report, which is crucial for both subsidy planning and discussions with your banker.
By carefully managing these aspects from business initiation to the first sale, you can ensure that you maximize your subsidy benefits, reduce costs, and enhance profits.
Reach Us
Call Us : 8683898080
E-mail Us : sales@kipfinancial.com
KIP Financial Consultancy Pvt. Ltd.
DSB – 38, Red Square Market, Hisar – 125001 (HR)
Leave a Comment