Guide to Entrepreneurs

Come to Karnataka - Tomorrow's business destination today. The search for answers to all your questions ends here. The Government of Karnataka provides a business environment that facilitates and not constrains your business. The objective of this guide is to provide general information and a step by step procedural guidelines to help entrepreneurs to set up or expand a business in Karnataka.

1.2 India is the world's largest democracy. It is the seventh largest country in the world.. India is one of the highly industrialized countries and fast emerging as a major force in the global economy. The stabilisation and structural adjustment measures initiated since 1991 mark a watershed in the country's economic policies. Since 1991 far reaching changes have been made in each element of the economic policy. During these years, India has migrated from a closed economy to a market oriented economy. The Government of India in its efforts to accelerate industrialisation and improve international competitiveness announced a liberalised Industrial Policy in 1991 and launched vigorous reforms of the monetary, trade and fiscal sectors. These economic reforms have opened up immense opportunities for the private sector, both domestic and foreign, to benefit from the process of liberalisation and globalisation.

1.3 The key element of the liberalised industrial policy and an important component of the reforms programme is the fresh approach towards foreign investment and technology tie ups. The policy changes are designed to attract significant capital flows into India on a sustained basis. A number of significant policy changes have been under taken to make investment in India an easier and more rewarding proposition.

As per the reformative Foreign Direct Investment Policy, FDI up to 100% is allowed, under the automatic route, in most sectors / activities. FDI under the automatic route does not require prior approval either by the Government of India or the Reserve Bank of India (RBI). Investors are only required to notify the concerned Regional office of RBI within 30 days of receipt of inward remittances and file required documents with that office within 30 days of issue of shares to foreign investors.

FDI in all sectors / activities is subject to sectoral guidelines and requirements. FDI is not permitted in Retail trade (except Single Brand product retailing); Lottery; Gambling and Atomic Energy. In the remaining sectors / activities, FDI up to 100% would be allowed on the automatic route.

1.4 Foreign companies are now permitted to open branch offices in India and Foreign Institutional Investors are also encouraged to invest in the Indian capital markets, both primary and secondary. Automatic permission will also be given for foreign technology agreements in high priority industries upto a certain lump sum payment of royalty. The Non Resident Indians are allowed to participate upto 24% equity through stock exchanges while Overseas Corporate Bodies are also allowed to invest upto 100% in high priority industries.

1.5 For foreign collaboration under automatic route investors are required to apply in Form FC-GPR in 10 copies to the Reserve Bank of India. In non-automatic cases investors are required to apply in Form FC-IL in nine copies to the Secretariat for Industrial Assistance, GoI or Foreign Investment Promotion Board, New Delhi. In case of setting up 100% EoU/ units in EPZ scheme application in the prescribed Form in 10 copies should be submitted to the Development Commissioner of the Export Processing Zone concerned for automatic approval and to the SIA for Government approval

1.6 The GoI abolished industrial licensing in all sectors but for five industries and opened several core and basic industries to the private sector. At present there is no investment limit for large Indian / Foreign companies.

1.7 The Government of India has announced the Foreign Trade Policy for the period 2004-09 in Sept. 2004. This policy contains a comprehensive package to give a massive thrust to India's exports. The policy removes all quantitative restrictions on exports. The policy was targeted to double India's present share of Global exports by 2009.

1.8 Karnataka is also keen to attract foreign direct investment to the State through its progressive policies and strategies. The federal policy guidelines of the Government of India are applicable to projects set up in the State also. The FDI proposals approved for the State will be monitored at the highest level to facilitate speedy implementation.

1.9 Karnataka is one of the 28 States in India and has emerged as an important industrial centre in the country. The State has 29 districts and 176 taluks as administrative units. Over the last 100 years, the State has had the distinction of building a strong and vibrant industrial base, which combines the intrinsic strengths of large public sector industrial undertakings, large and medium privately owned industries and a very wide and dispersed small scale sector. Karnataka has demonstrated its strength over a wide spectrum of industries and has outstanding examples of success both in the old economy and new economy. In recent times, Karnataka has emerged as the knowledge and technology capital of the country, making rapid strides in the new economy as well. Karnataka's capital, Bangalore, is globally recognised as the Silicon Valley of the Asian region and is also considered as technology capital of the country.

1.10 Doing business in Karnataka has been made more easier now. You have Karnataka Udyog Mitra, the one stop facilitation centre helping to make your proposal a reality through efficient, real time response.

1.11 Karnataka is one among the leading industrialised States in the country. The State is known for its capabilities in high-tech industries in key sectors like telecommunication, electronics, information technology, precision engineering, machine tools, automobiles, readymade garments, bio-technology and food processing have been noteworthy. The strong base of large and medium scale industries in Karnataka has given a wide scope for promotion of a vibrant small scale sector in the State providing considerable employment opportunities.

1.12 Karnataka has many inherent advantages for investors - both domestic and overseas and offers ample opportunities for investment. The State is the leader in knowledge based, technology driven industries like information technology, bio-technology, electronics, telecommunication, aerospace and allied areas. Karnataka's capital city Bangalore is recognized the world over as the 'Knowledge capital of India'.

1.13 Karnataka's pre-eminent position on the industrial and business map of India is based on several factors. The State is rich in natural resources and is known for its salubrious climate. It has a strong resource base of highly educated and skilled people, backed by extensive educational infrastructure, comprising world-renowned schools, colleges, institutes of higher learning and research and development centres. Its labour force is highly skilled, disciplined and hardworking. Above all, it has far-sighted, development-oriented, investor-friendly governance that firmly believes in, and actively encourages, public - private partnerships.

1.14 The State is widely recognised as a centre of learning with 16 universities, 141 engineering colleges, 39 medical colleges, 43 dental colleges, 648 general / law colleges and 189 polytechnics. The State has over 100 R&D centres and about 300 MNCs are present in the State. The State is linked by air with international centres and also has a wide network of roads and railways. Bangalore has well established institutions offering a wide gamut of educational services. The Indian Institute of Science, Indian Institute of Management, Indian Institute of Information Technology and National Centre for Biological Sciences are the most admired and sought-after institutions in India.

1.15 Karnataka was the first State to announce its Industrial Policy way back in 1983. The State Government has also announced exclusive policies for promotion of tourism, agro food processing industries, infrastructure facilities, export promotion, information technology and biotechnology industries.

1.16 In order to provide a level playing field to the investors, the State Government has formulated an Industrial Policy which has come into effect from 1.4.2006 and is in force till 31.03.2011.

Emphasis on sustained and growth oriented industrialization with employment and revenue generation for overall socioeconomic development of the State.
Strengthening manufacturing sector, enhance share of Karnataka’s export to 20% and create additional employment to atleast 10 lakh persons by the end of the Policy period.
Multi pronged strategy for development of infrastructure, human resource development, technology upgradation, quality improvement and facilitation for ‘ease of doing business’.
Focus for upgrading industrial infrastructure facility throughout the State enabling investors to avail ready-to-use facilities.
Creation of an exclusive Infrastructure Fund with a corpus of Rs. 500 crore.
Impetus on promotion of agro food processing industries.
Time bound implementation of ongoing sector specific infrastructural projects.
Thrust for human resource development. Intention to establish specialized skill development institutions at key locations in PPP mode.
Focused attention to sub-sectors like aerospace, engineering, automobile, pharmaceuticals, machine tools, steel, IT/ BT etc., where State has core competency.
Promotion of local entrepreneurship with a target to impart entrepreneurship training to three lakh persons during the Policy period.
Measures for intensive industrialization of backward taluks as categorized by Dr. D M Nanjundappa Committee.
Categorization of Taluks into three zones – Zone-1 comprising 79 Most and More Backward Taluks and Zone-2 consisting 85 Backward Taluks. Zone-3 has 12 industrially developed Taluks.

1.18 As per the Industrial Policy 2006-11, following incentives and concessions are offered to industries.

Capital investment subsidy to the extent of 25% in Zone-1 and 20% in Zone-2 for micro and small industries.
100% exemption of stamp duty in Zone-1 and 75% in Zone-2 for all industries
Waiver of conversion fine – 100% in Zone-1 and 75% in Zone-2, subject to limitation on extent of land.
One time capital subsidy upto 50% of the cost with a ceiling of Rs. 100 lakhs per unit for setting up effluent treatment plants in all zones.
Entry Tax and special Entry Tax exemption for three years in Zone -1 & 2 for procurement of capital goods and for five years incase of procurement of raw materials.
Interest subsidy at 4% for technology upgradation loan availed from SFC and Scheduled Commercial Banks.
Subsidy at 50% of the cost of Patent Registration subject to a ceiling of Rs. 2 lakhs per unit.
Additional capital subsidy of 5% for SC / ST / PH/ Minority/Women and Ex-servicemen entrepreneurs subject to a ceiling of Rs. 5 lakh for women entrepreneurs and Rs. 1 lakh for other entrepreneurs.

In addition, entrepreneurs who belong to Scheduled Caste / Scheduled Tribe, will be offered industrial plots / sheds, by KSSIDC at subsidized rate to the extent of 40% of the total cost, subject to maximum limit of Rs.2.00 lakh vide G.O. No. CI 305 CSC 2004 dt.19.7.2005.

1.19 Incentives pertaining to Special Economic Zones - Government of India, in order to boost exports from the country formulated a new scheme viz Special Economic Zone (SEZ) during 2001. Accordingly, the State Government has formulated a State Policy for SEZ vide GO No C1/282/SP1/2001 dt. 25.2.2002.

100% FDI allowed for townships with residential, educational and recreational facilities on a case to case basis and Franchise for basic telephone service in SEZ.
Income Tax benefits u/s 80 IA to developers for any block of 10 years in 15 years.
Duty free import / domestic procurement of goods for development, operation and maintenance of SEZ.
Exemption from Service Tax / CST.
Income of infrastructure capital fund / co. from investment in SEZ exempt from Income Tax.
Investments made by individuals etc in a SEZ co are eligible for exemption u/s 88 of IT Act.
Developer permitted to transfer infrastructure facility for operation and maintenance.
Generation, transmission and distribution of power in SEZ allowed.
Freedom in allocation of space & built up area to approved SEZ units on commercial basis.
Authorized to provide and maintain services like water, electricity, security, restaurants and recreation centers on commercial lines.

SEZ units may import or procure from domestic sources, duty free, all their requirements of capital goods, raw materials, consumables, spares, packing materials, office equipment, DG sets etc. for implementation of their project in the Zone without any license or specific approval.
Duty free import / domestic procurement of goods for setting up of SEZ units.
Goods imported / procured locally duty-free can be utilized over the approval period of 5 years.
Domestic sales by SEZ units will be exempt from SAD.
Domestic sale of finished products, by-products on payment of applicable Custom duty.
Domestic sale rejects and waste and scrap on payment of applicable Custom duty on the transaction value.

Physical export benefit.
100% IT exemption (10A) for first 5 years and 50% for 2 years thereafter.
Reinvestment allowance to the extent of 50% of ploughed back profits.
Carry forward of losses

100% foreign direct investment under the automatic route is allowed in manufacturing sector in SEZ units except arms and ammunition, explosive, atomic substance, narcotics and hazardous chemicals, distillation and brewing of alcoholic drinks and cigarettes, cigars and manufactured tobacco substitutes.
No cap on foreign investments for SSI reserved items.
Banking / Insurance/External Commercial Borrowings.
Setting up Off-shore Banking Units (OBU) allowed in SEZ.
OBU allowed 100% Income Tax exemption on profit for 3 years and 50% for the next two years.
External commercial borrowings by units up to USD 500 million a year allowed without any maturity restrictions.
Freedom to bring in export proceeds without any time limit.
Flexibility to keep 100% of export proceeds in EEFC account and freedom to make overseas investment from it.
Commodity hedging permitted.
Exemption from interest rate surcharge on import finance.
SEZ units allowed to 'write-off' unrealized export bills.

Exemption to sales made from Domestic Tariff Area to SEZ units from Income Tax Act

Exemption from Service Tax to SEZ units

SEZs permitted to have non-polluting industries in IT and facilities like golf courses, desalination plants, hotels and non-polluting service industries in the Coastal Regulation Zone area.
Exemption from public hearing under Environment Impact Assessment Notification.

Delegation of Labour Commissioner’s powers to the designated Development Commissioner of SEZ.

Supplies from Domestic Tariff Area (DTA) to SEZ to be treated as physical export and the DTA supplier would be entitled to:

(Separate booklets on Industrial Policy and Package of Incentives & Concessions and SEZ Policy are available with KUM / DIC or visit www.kumbangalore.com)

1.20 The Department of Industries & Commerce is the anchor department as far as development of industries is concerned. This department is responsible for formulating and implementation of industrial policies in the State. The Directorate of I&C having its headquarters at Bangalore, has a network of District Industries Centres in all the 29 Districts.

1.21 The Directorate of Industries & Commerce is the first State Government Department in the country to get the ISO Certificate which affirms the quality, efficiency, productivity and service standards. The mission of the Department is to provide prompt and efficient services to the entrepreneurs / industrialists for smooth and time-bound implementation and operation of industrial projects and schemes.

1.22 TAlong with the Department of Industries and Commerce, other departments like Dept. of Information Technology & Biotechnology, Dept. of Tourism, Dept. of Infrastructure Development, Dept. of Food Processing Industries, Dept. of Textiles, Dept. of Mines & Geology are also engaged in the development of sectoral industries and business in the State of Karnataka. There is a single point facilitation mechanism existing in the State, where the projects related to all these departments are facilitated.

Redressal of Grievances:

1.23 The Department aims to settle the complaints received from industrialists / entrepreneurs within 10 working days of its receipt. In the department, Joint Director, (Planning) is the Grievance Redressal Officer for the complaints received from the general public / Boards and Corporations. In the DICs, the officer in-charge of Entrepreneurs Guidance Cell is the Grievance Redressal Officer.

1.24 Karnataka Udyog Mitra [KUM] is the single point contact for investors in the State. Investors may contact Karnataka Udyog Mitra for information on Karnataka, its advantages, potential, finance, infrastructure, statutory requirements and so on. KUM interacts with investors in detail and helps them to understand the advantages and unique features of Karnataka and also its business environment. KUM also coordinates the visit of investors, both national and international to the State, arranges meetings with other departments / agencies. It provides information on land, building regulations, tax regime, and incentives etc., to enable investors to firm up with their investment decisions. Investors are also facilitated by KUM to obtain necessary clearances / approvals from the Government departments / agencies for their projects. Investors get information on policies and procedures from KUM. This Nodal Agency closely monitors the implementation of projects.

1.25 The address and contact details of important Government Departments / organisations are given below:

Guide To Entrepreneurs
Part I General features Come to Karnataka - Tomorrow's business destination today. The search for answers to all your questions ends here. The Government of Karnataka provides a business environment that facilitates and not constrains your business. The objective of this guide is to provide general information and a step by step procedural guidelines to help entrepreneurs to set up or expand a business in Karnataka. Overall business environment 1.2 India is the world's largest democracy. It is the seventh largest country in the world.. India is one of the highly industrialized countries and fast emerging as a major force in the global economy. The stabilisation and structural adjustment measures initiated since 1991 mark a watershed in the country's economic policies. Since 1991 far reaching changes have been made in each element of the economic policy. During these years, India has migrated from a closed economy to a market oriented economy. The Government of India in its efforts to accelerate industrialisation and improve international competitiveness announced a liberalised Industrial Policy in 1991 and launched vigorous reforms of the monetary, trade and fiscal sectors. These economic reforms have opened up immense opportunities for the private sector, both domestic and foreign, to benefit from the process of liberalisation and globalisation. 1.3 The key element of the liberalised industrial policy and an important component of the reforms programme is the fresh approach towards foreign investment and technology tie ups. The policy changes are designed to attract significant capital flows into India on a sustained basis. A number of significant policy changes have been under taken to make investment in India an easier and more rewarding proposition. As per the reformative Foreign Direct Investment Policy, FDI up to 100% is allowed, under the automatic route, in most sectors / activities. FDI under the automatic route does not require prior approval either by the Government of India or the Reserve Bank of India (RBI). Investors are only required to notify the concerned Regional office of RBI within 30 days of receipt of inward remittances and file required documents with that office within 30 days of issue of shares to foreign investors. FDI in all sectors / activities is subject to sectoral guidelines and requirements. FDI is not permitted in Retail trade (except Single Brand product retailing); Lottery; Gambling and Atomic Energy. In the remaining sectors / activities, FDI up to 100% would be allowed on the automatic route. 1.4 Foreign companies are now permitted to open branch offices in India and Foreign Institutional Investors are also encouraged to invest in the Indian capital markets, both primary and secondary. Automatic permission will also be given for foreign technology agreements in high priority industries upto a certain lump sum payment of royalty. The Non Resident Indians are allowed to participate upto 24% equity through stock exchanges while Overseas Corporate Bodies are also allowed to invest upto 100% in high priority industries. 1.5 For foreign collaboration under automatic route investors are required to apply in Form FC-GPR in 10 copies to the Reserve Bank of India. In non-automatic cases investors are required to apply in Form FC-IL in nine copies to the Secretariat for Industrial Assistance, GoI or Foreign Investment Promotion Board, New Delhi. In case of setting up 100% EoU/ units in EPZ scheme application in the prescribed Form in 10 copies should be submitted to the Development Commissioner of the Export Processing Zone concerned for automatic approval and to the SIA for Government approval 1.6 The GoI abolished industrial licensing in all sectors but for five industries and opened several core and basic industries to the private sector. At present there is no investment limit for large Indian / Foreign companies. 1.7 The Government of India has announced the Foreign Trade Policy for the period 2004-09 in Sept. 2004. This policy contains a comprehensive package to give a massive thrust to India's exports. The policy removes all quantitative restrictions on exports. The policy was targeted to double India's present share of Global exports by 2009. 1.8 Karnataka is also keen to attract foreign direct investment to the State through its progressive policies and strategies. The federal policy guidelines of the Government of India are applicable to projects set up in the State also. The FDI proposals approved for the State will be monitored at the highest level to facilitate speedy implementation. Top Doing business in Karnataka, with ease 1.9 Karnataka is one of the 28 States in India and has emerged as an important industrial centre in the country. The State has 29 districts and 176 taluks as administrative units. Over the last 100 years, the State has had the distinction of building a strong and vibrant industrial base, which combines the intrinsic strengths of large public sector industrial undertakings, large and medium privately owned industries and a very wide and dispersed small scale sector. Karnataka has demonstrated its strength over a wide spectrum of industries and has outstanding examples of success both in the old economy and new economy. In recent times, Karnataka has emerged as the knowledge and technology capital of the country, making rapid strides in the new economy as well. Karnataka's capital, Bangalore, is globally recognised as the Silicon Valley of the Asian region and is also considered as technology capital of the country. 1.10 Doing business in Karnataka has been made more easier now. You have Karnataka Udyog Mitra, the one stop facilitation centre helping to make your proposal a reality through efficient, real time response. Industrialization in Karnataka 1.11 Karnataka is one among the leading industrialised States in the country. The State is known for its capabilities in high-tech industries in key sectors like telecommunication, electronics, information technology, precision engineering, machine tools, automobiles, readymade garments, bio-technology and food processing have been noteworthy. The strong base of large and medium scale industries in Karnataka has given a wide scope for promotion of a vibrant small scale sector in the State providing considerable employment opportunities. Advantages for investment 1.12 Karnataka has many inherent advantages for investors - both domestic and overseas and offers ample opportunities for investment. The State is the leader in knowledge based, technology driven industries like information technology, bio-technology, electronics, telecommunication, aerospace and allied areas. Karnataka's capital city Bangalore is recognized the world over as the 'Knowledge capital of India'. 1.13 Karnataka's pre-eminent position on the industrial and business map of India is based on several factors. The State is rich in natural resources and is known for its salubrious climate. It has a strong resource base of highly educated and skilled people, backed by extensive educational infrastructure, comprising world-renowned schools, colleges, institutes of higher learning and research and development centres. Its labour force is highly skilled, disciplined and hardworking. Above all, it has far-sighted, development-oriented, investor-friendly governance that firmly believes in, and actively encourages, public - private partnerships. 1.14 The State is widely recognised as a centre of learning with 16 universities, 141 engineering colleges, 39 medical colleges, 43 dental colleges, 648 general / law colleges and 189 polytechnics. The State has over 100 R&D centres and about 300 MNCs are present in the State. The State is linked by air with international centres and also has a wide network of roads and railways. Bangalore has well established institutions offering a wide gamut of educational services. The Indian Institute of Science, Indian Institute of Management, Indian Institute of Information Technology and National Centre for Biological Sciences are the most admired and sought-after institutions in India. Top Policy support 1.15 Karnataka was the first State to announce its Industrial Policy way back in 1983. The State Government has also announced exclusive policies for promotion of tourism, agro food processing industries, infrastructure facilities, export promotion, information technology and biotechnology industries. 1.16 In order to provide a level playing field to the investors, the State Government has formulated an Industrial Policy which has come into effect from 1.4.2006 and is in force till 31.03.2011. 1.17 Salient features of this Industrial Policy 2006-11 are given below: Emphasis on sustained and growth oriented industrialization with employment and revenue generation for overall socioeconomic development of the State. Strengthening manufacturing sector, enhance share of Karnataka’s export to 20% and create additional employment to atleast 10 lakh persons by the end of the Policy period. Multi pronged strategy for development of infrastructure, human resource development, technology upgradation, quality improvement and facilitation for ‘ease of doing business’. Focus for upgrading industrial infrastructure facility throughout the State enabling investors to avail ready-to-use facilities. Creation of an exclusive Infrastructure Fund with a corpus of Rs. 500 crore. Impetus on promotion of agro food processing industries. Time bound implementation of ongoing sector specific infrastructural projects. Thrust for human resource development. Intention to establish specialized skill development institutions at key locations in PPP mode. Focused attention to sub-sectors like aerospace, engineering, automobile, pharmaceuticals, machine tools, steel, IT/ BT etc., where State has core competency. Promotion of local entrepreneurship with a target to impart entrepreneurship training to three lakh persons during the Policy period. Measures for intensive industrialization of backward taluks as categorized by Dr. D M Nanjundappa Committee. Categorization of Taluks into three zones – Zone-1 comprising 79 Most and More Backward Taluks and Zone-2 consisting 85 Backward Taluks. Zone-3 has 12 industrially developed Taluks. Incentives and Concessions 1.18 As per the Industrial Policy 2006-11, following incentives and concessions are offered to industries. Capital investment subsidy to the extent of 25% in Zone-1 and 20% in Zone-2 for micro and small industries. 100% exemption of stamp duty in Zone-1 and 75% in Zone-2 for all industries Waiver of conversion fine – 100% in Zone-1 and 75% in Zone-2, subject to limitation on extent of land. One time capital subsidy upto 50% of the cost with a ceiling of Rs. 100 lakhs per unit for setting up effluent treatment plants in all zones. Entry Tax and special Entry Tax exemption for three years in Zone -1 & 2 for procurement of capital goods and for five years incase of procurement of raw materials. Interest subsidy at 4% for technology upgradation loan availed from SFC and Scheduled Commercial Banks. Subsidy at 50% of the cost of Patent Registration subject to a ceiling of Rs. 2 lakhs per unit. Additional capital subsidy of 5% for SC / ST / PH/ Minority/Women and Ex-servicemen entrepreneurs subject to a ceiling of Rs. 5 lakh for women entrepreneurs and Rs. 1 lakh for other entrepreneurs. In addition, entrepreneurs who belong to Scheduled Caste / Scheduled Tribe, will be offered industrial plots / sheds, by KSSIDC at subsidized rate to the extent of 40% of the total cost, subject to maximum limit of Rs.2.00 lakh vide G.O. No. CI 305 CSC 2004 dt.19.7.2005. 1.19 Incentives pertaining to Special Economic Zones - Government of India, in order to boost exports from the country formulated a new scheme viz Special Economic Zone (SEZ) during 2001. Accordingly, the State Government has formulated a State Policy for SEZ vide GO No C1/282/SP1/2001 dt. 25.2.2002. Following are the incentives and facilities: For SEZ Developers 100% FDI allowed for townships with residential, educational and recreational facilities on a case to case basis and Franchise for basic telephone service in SEZ. Income Tax benefits u/s 80 IA to developers for any block of 10 years in 15 years. Duty free import / domestic procurement of goods for development, operation and maintenance of SEZ. Exemption from Service Tax / CST. Income of infrastructure capital fund / co. from investment in SEZ exempt from Income Tax. Investments made by individuals etc in a SEZ co are eligible for exemption u/s 88 of IT Act. Developer permitted to transfer infrastructure facility for operation and maintenance. Generation, transmission and distribution of power in SEZ allowed. Freedom in allocation of space & built up area to approved SEZ units on commercial basis. Authorized to provide and maintain services like water, electricity, security, restaurants and recreation centers on commercial lines. Units in SEZ a) Customs and Excise SEZ units may import or procure from domestic sources, duty free, all their requirements of capital goods, raw materials, consumables, spares, packing materials, office equipment, DG sets etc. for implementation of their project in the Zone without any license or specific approval. Duty free import / domestic procurement of goods for setting up of SEZ units. Goods imported / procured locally duty-free can be utilized over the approval period of 5 years. Domestic sales by SEZ units will be exempt from SAD. Domestic sale of finished products, by-products on payment of applicable Custom duty. Domestic sale rejects and waste and scrap on payment of applicable Custom duty on the transaction value. b) Income Tax Physical export benefit. 100% IT exemption (10A) for first 5 years and 50% for 2 years thereafter. Reinvestment allowance to the extent of 50% of ploughed back profits. Carry forward of losses C) Foreign Direct Investment 100% foreign direct investment under the automatic route is allowed in manufacturing sector in SEZ units except arms and ammunition, explosive, atomic substance, narcotics and hazardous chemicals, distillation and brewing of alcoholic drinks and cigarettes, cigars and manufactured tobacco substitutes. No cap on foreign investments for SSI reserved items. Banking / Insurance/External Commercial Borrowings. Setting up Off-shore Banking Units (OBU) allowed in SEZ. OBU allowed 100% Income Tax exemption on profit for 3 years and 50% for the next two years. External commercial borrowings by units up to USD 500 million a year allowed without any maturity restrictions. Freedom to bring in export proceeds without any time limit. Flexibility to keep 100% of export proceeds in EEFC account and freedom to make overseas investment from it. Commodity hedging permitted. Exemption from interest rate surcharge on import finance. SEZ units allowed to 'write-off' unrealized export bills. d) Central Sales Tax Exemption to sales made from Domestic Tariff Area to SEZ units from Income Tax Act e) Service Tax Exemption from Service Tax to SEZ units f) Environment SEZs permitted to have non-polluting industries in IT and facilities like golf courses, desalination plants, hotels and non-polluting service industries in the Coastal Regulation Zone area. Exemption from public hearing under Environment Impact Assessment Notification. g) Labour related laws Delegation of Labour Commissioner’s powers to the designated Development Commissioner of SEZ. h) Domestic suppliers to Special Economic Zone Supplies from Domestic Tariff Area (DTA) to SEZ to be treated as physical export and the DTA supplier would be entitled to: (Separate booklets on Industrial Policy and Package of Incentives & Concessions and SEZ Policy are available with KUM / DIC or visit www.kumbangalore.com) Top Support Departments 1.20 The Department of Industries & Commerce is the anchor department as far as development of industries is concerned. This department is responsible for formulating and implementation of industrial policies in the State. The Directorate of I&C having its headquarters at Bangalore, has a network of District Industries Centres in all the 29 Districts. 1.21 The Directorate of Industries & Commerce is the first State Government Department in the country to get the ISO Certificate which affirms the quality, efficiency, productivity and service standards. The mission of the Department is to provide prompt and efficient services to the entrepreneurs / industrialists for smooth and time-bound implementation and operation of industrial projects and schemes. 1.22 TAlong with the Department of Industries and Commerce, other departments like Dept. of Information Technology & Biotechnology, Dept. of Tourism, Dept. of Infrastructure Development, Dept. of Food Processing Industries, Dept. of Textiles, Dept. of Mines & Geology are also engaged in the development of sectoral industries and business in the State of Karnataka. There is a single point facilitation mechanism existing in the State, where the projects related to all these departments are facilitated. Redressal of Grievances: 1.23 The Department aims to settle the complaints received from industrialists / entrepreneurs within 10 working days of its receipt. In the department, Joint Director, (Planning) is the Grievance Redressal Officer for the complaints received from the general public / Boards and Corporations. In the DICs, the officer in-charge of Entrepreneurs Guidance Cell is the Grievance Redressal Officer. Single Point Contact 1.24 Karnataka Udyog Mitra [KUM] is the single point contact for investors in the State. Investors may contact Karnataka Udyog Mitra for information on Karnataka, its advantages, potential, finance, infrastructure, statutory requirements and so on. KUM interacts with investors in detail and helps them to understand the advantages and unique features of Karnataka and also its business environment. KUM also coordinates the visit of investors, both national and international to the State, arranges meetings with other departments / agencies. It provides information on land, building regulations, tax regime, and incentives etc., to enable investors to firm up with their investment decisions. Investors are also facilitated by KUM to obtain necessary clearances / approvals from the Government departments / agencies for their projects. Investors get information on policies and procedures from KUM. This Nodal Agency closely monitors the implementation of projects. Top 1.25 The address and contact details of important Government Departments / organisations are given below: Principal Secretary to Government Commerce & Industries Department, R.No. 106, 1st Floor, Vikasa Soudha, Bangalore - 560 001 Tel. : 22252443 / 22034340 \| Fax: 22259870 Website: www.karnatakaindustry.gov.in Principal Secretary to Government Department of Infrastructure Development Room No.27, Ground Floor, Vikasa Soudha, Bangalore - 560 001 Tel. : 22282366 / 22034107 \| Fax: 22280605 Secretary to Government SSI, Textiles & Mines, R.No. 135, 1st Floor, Vikasa Soudha, Bangalore - 560 001 Tel. : 22353933 / 22024235 \| Fax: 22356381 Commissioner for Industrial Development & Director of I&C Department of Industries & Commerce No. 49, 2nd Floor, Khanija Bhavan, Race course Road, Bangalore - 560 001. Tel: 22386796 \| Fax: 22389909 Secretary to Government Department of Information Technology & Biotechnology 6th Floor, 5th Stage, M.S. Building, Dr. Ambedkar Veedhi, Bangalore - 560 001 Tel.: 22280562 / 22280561 \| Fax: 22288340. Website : www.bangaloreit.in Director Department of Tourism, #49, 2 nd Floor, Khanija Bhavan, Race Course Road, Bangalore - 560 001. Tel.: 080 – 22352525 \| Fax: 22352626, website: www.karnatakatourism.org Secretary to Government Department of Food Processing & Harvest Technology Room No. 541, 5th Floor, M.S. Building, Dr. Ambedkar Veedhi, Bangalore - 560 001 Tel. : 22353938 / 22092953 \| Fax: 22389874 Commissioner for Textile Development and Director for H & T Department of Textiles & Handlooms, 14/3A, R.P. Bhavan, 3 rd Floor, Nrupathnga Road , Bangalore - 560 001 Tel.: 22271628 \| Fax: 22226082 Office of the Chief Electrical Inspector to Govt. P.B. No.5148, Mysugar Building , J.C. Road , Bangalore - 560 002 Tel. : 22228858 / 22229092 Fax : 22229091 Director Department of Mines & Geology #49, 5th Floor, Khanija Bhavan, Race Course Road , Race Course Road , Bangalore - 560 001. Tel. : 22384247 / 22269632, Fax : 22269633 Website: http://mines.kar.nic.in Managing Director Karnataka Udyog Mitra # 49, 3rd Floor, Khanija Bhavan, South Wing, Race course Road, Bangalore - 560 001. Tel.: 22282392 / 22285659 / 22381232 \| Fax: 22266063 website : www.kumbangalore.com or Resident Director Karnataka Udyog Mitra BHEEMA, Karnataka Bhavan - III No.209 & 210, Khel Gaon Road , HUDCO Place , Andrews Ganj New Delhi - 110 049 Tel.: 011 – 26263110 \| Telefax: 011-26263109 Top
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