Incentives and Support for Semiconductor Startups in Karnataka
The document outlines the incentives available for startups in the semiconductor sector in India, with a focus on the Karnataka Electronics System Design & Manufacturing Policy 2017-2022. It details various incentives provided by the Karnataka government, including electricity duty exemption, capital subsidy, interest subsidy, land-related incentives, and more. Additionally, it highlights the role of Chartered Accountants in helping startups avail these incentives. The incentives cover a wide range of aspects including financial, infrastructure, skill development, research and development, patent registration, international marketing, and more. The document also includes a comparison of incentives provided by different states.
Summary of Incentives
| Sl. No | Type of Incentive | Amount (in Rupees) | No. of claims Allowed |
|---|---|---|---|
| 1 | Patent Registration Incentive |
2 Lakhs – Domestic Patent 10 Lakhs – International patent |
5 |
| 2 | International Marketing Incentive | 5 Lakhs | 2 times per year |
| 3 | R&D Grant | 2 Crores | 2 times during policy period |
| 4 | Capital Subsidy | 10 Crores | - |
| 5 | Reimbursement of Quality Certification Costs | 10 Lakhs | Once in a year |
| 6 | Reimbursement of Prototyping Costs | 10 Lakhs per year | 2 sanctions per year |
| 7 | Interest Subsidy | 50 Lakhs | - |
| 8 | PF/ESI Incentive | 12 Lakhs | One claim in policy period |
| 9 | Exemption from Payment of Stamp Duty |
100% - Startup/MSME 75% - other than startup / MSME |
- |
| 10 | Reimbursement of Land Conversion Fee |
75% - Startup/MSME 50% - Large and Mega Enterprises |
- |
| 11 | Power Tariff Concession | - | - |
| 12 | Subsidy for Setting up ETP |
50 Lakhs – Startups and MSMEs 1 Crore - Large and Mega Enterprises |
- |
Incentives Available For Startups In Semiconductor Sector
INTRODUCTION
India, with its large consumer base and growing economy, has witnessed a surge in demand for electronic devices. However, the country heavily relies on imports to meet this demand, especially for semiconductors.
Semiconductor Incentive Scheme: Key Objectives
- Financial Incentives
- Infrastructure Support
- Research and Development (R&D)
- Skill Development
Silicon is used widely in semiconductor sector, but India imports it as the demand for silicon in various industries often exceeds domestic production capacity.
As a result, India imports silicon to meet the needs of its manufacturing industries, including the semiconductor sector.
Moving on this article focuses on various policy initiatives taken by state governments of India. Let’s move on to incentives provided by Karnataka State.
Karnataka Electronics System Design & Manufacturing Policy 2017-2022
The Government of Karnataka, facilitated by the Karnataka Biotechnology and Information Technology Services (KBITS), has unveiled the ESDM Policy 2017-22. This policy entails ecosystem facilitation and a spectrum of incentives and concessions tailored for Electronic System Design and Manufacturing (ESDM) enterprises operating within the state.
To avail these incentives/concessions, an ESDM company must be registered with DIT/KBITS as a KESDM company.
The company or entity should be registered in Karnataka under the Karnataka Shops and Commercial Establishment Act, 1961.
Let's explore the array of incentives provided by the Karnataka government specifically tailored for entities operating within the semiconductor sector.
1. Patent Registration Incentive
| Eligible Companies | Type of Patent | Amount Reimbursed (INR) | Total Reimbursements Allowed per Company |
|---|---|---|---|
| KESDM firms | Domestic | Up to 2,00,000 | Up to 5 |
| KESDM firms | International | Up to 10,00,000 | Uttto 5 |
2. International Marketing Incentive
| Eligible Companies | Activity | Maximum Reimbursement Amount per Year (INR) | Frequency of Reimbursement | Limitations |
|---|---|---|---|---|
| KESDM companies | Export Promotion and International Brand Establishment Activities | Up to 5,00,000 | Every six months |
|
3. R&D Grant
| Eligible Companies | Maximum Grant Amount per Annum (INR) | Frequency of Claim | Supplementary Benefits |
|---|---|---|---|
| Companies < 7 years old | Up to 2 Crores | Twice during policy period | Supplemented by similar benefits from the Government of India |
4. Capital Subsidy
| Eligible Entities | Capital Subsidy Percentage | Maximum Subsidy Amount (INR) | Applicability |
|---|---|---|---|
| Registered KESDM companies | Up to 10% | Up to 10 Crores | Applicable to the first two anchor units in each Greenfield cluster. Not applicable to Startups and MSMEs. |
5. Reimbursement of Quality Certification Costs
| Eligible Entities | Type of Charges | Reimbursement Percentage | Maximum Reimbursement Amount per Annum (INR) | Types of Testing/Certifications Covered |
|---|---|---|---|---|
| Registered KESDM Startups and MSMEs | Testing/Certification | 50% | Up to 10 lakhs | Product testing conducted domestically or abroad, including certifications like CE, CCC, UL, ISO, CMM, SA, RU, FDA, and CFDA |
6. Reimbursement of Prototyping Costs
| Company Type | Eligibility Criteria | Reimbursement Percentage | Upper Limit | Maximum Sanctions |
|---|---|---|---|---|
| Registered KESDM Startups | Eligible for reimbursement | 50% of the cost incurred | INR 10 Lacs/year | Maximum of 2 sanctions/year |
| MSMEs | Eligible for reimbursement | 50% of the cost incurred | INR 10 Lacs/year | Maximum of 2 sanctions/year |
7. Interest Subsidy
| Company Type | Subsidy Type | Subsidy Rate | Loan Limit | Duration | Loan Providers | Payment Conditions |
|---|---|---|---|---|---|---|
| Registered KESDM Startups | Interest subsidy | 6% per annum | Up to INR 50 lakhs | Five years | Scheduled banks, KSFC, etc. | Subsidies paid directly if no defaults occur |
| MSMEs | Interest subsidy | 6% per annum | Up to INR 50 lakhs | Five years | Scheduled banks, KSFC, etc. | Subsidies paid directly if no defaults occur |
8. PF/ESI Incentive
| Company Type | Reimbursement Type | Reimbursement Amount | Total Reimbursement Limit | Employment Requirement |
|---|---|---|---|---|
| Registered KESDM Startups | PF/ESI Contributions | INR 2,000 per employee per month | Up to INR 12 lakhs | Two-year continuous employment commitment |
| MSMEs | PF/ESI Contributions | INR 2,000 per employee per month | Up to INR 12 lakhs | Two-year continuous employment commitment |
9. Exemption from Payment of Stamp Duty and Concessional Registration Charges
| Company Type | Exemption/Concession Type | Duration | Eligible Documents | Eligible Properties |
|---|---|---|---|---|
| Registered KESDM | Stamp Duty Exemption | Initial 5 years | Loan agreements, mortgage deeds, lease deeds | Industrial properties from specified entities |
| Concessional Registration Rates | Initial 5 years | Loan documents, lease deeds, sale deeds | Lands purchased under specific acts, approved projects |
10. Reimbursement of Land Conversion Fee
| Company Type | Reimbursement Percentage | Eligibility Criteria |
|---|---|---|
| Registered KESDM | Startups and MSMEs: 75% | Conversion of agricultural land to industrial use |
| Large/Mega Enterprises: 50% | Conversion of agricultural land to industrial use |
11. Power Tariff Concession
| Company Type | Tariff Type | Regulatory Body |
|---|---|---|
| Registered KESDM Companies | Industrial Power Tariff | Karnataka Electricity Regulatory Commission (KERC) |
| Associated Industries in Karnataka | Industrial Power Tariff | Karnataka Electricity Regulatory Commission (KERC) |
12. Subsidy for Setting up ETP
| Company Type | Subsidy Type | Subsidy Rate | Subsidy Limit |
|---|---|---|---|
| Registered KESDM | Capital Subsidy for ETP | Up to 50% of ETP cost | Startups and MSMEs: Up to INR 50 lakhs; Large and Mega Enterprises: Up to INR 1 crore |
Steps To Avail The Benefits
1. Register the company for KESDM recognition.
2. Download and fill the form for relevant incentive and submit it along with supporting documents to KBITS Office
3. KBITS will review the application and verify the supporting documents.
4. After the application meets eligible criteria, physical inspection, if required, will be carried out.
5. After the physical inspection is carried out, the relevant certificate will be issued.
Karnataka Biotechnology and Information Technology Services (KBITS) collaborates with the Department of Information Technology and Biotechnology to facilitate and advance the Information Technology and Biotech sectors within the state. This is achieved through active involvement in organizing and participating in a variety of events including roadshows, trade shows, conferences, symposia, and seminars at both national and international levels.
Role Of Chartered Accountants In Helping People Avail These Incentives
CA’s play an important role in this aspect.
For availing incentives, the documents required include various certifications by Chartered Accountants. Some of them are listed below:
Chartered Accountants play an important role in bridging the gap by providing education to people. By leveraging their expertise in finance, taxation, and regulatory compliance, CA’s can provide valuable support to startups seeking to avail incentives offered by state governments for the semiconductor sector and other industries.
In the forthcoming article, we will conduct a comparative analysis of the incentives offered by Karnataka in contrast to those provided by other states. This examination aims to assist you in selecting the optimal location for establishing your semiconductor company.
Disclaimer:
“The information contained herein is only for informational purpose and should not be considered for any particular instance or individual or entity. We have obtained information from publicly available sources, there can be no guarantee that such information is accurate as of the date it is received, or it will continue to be accurate in future. No one should act on such information without obtaining professional advice after thorough examination of particular situation.”
Prepared On:
17/10/23
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