Special Incentives Scheme, Karnataka

To boost the investment in the ESDM sector and thereby increase in direct employment in the state

On September 3, 2020, the cabinet approved Special Incentives Scheme in Karnataka. This scheme is mainly for the state’s Electronic System Design (ESDM) sector. This scheme is mainly to encourage investments in the sector wherein there will be 25% investment subsidy on land and 20% on plant and machinery along with other incentives. This scheme will boost the investment and direct employment in the state. It is expected to attract Rs. 5000 crore investment in the next 5 years.


Scheme name:Special Incentives Scheme
Scheme under:Karnataka Government
Beneficiaries:Electronic System Design (ESDM) sector
Benefit:Subsidies and Incentives for new capital investment and capacity expansion in the sector
Main Objective:To boost the investment in the ESDM sector and thereby increase in direct employment in the state

Objectives and Benefits:

  • This scheme aims to attract and boost investment in the ESDM sector of the state
  • It will also provide about 43000 direct employment opportunities in the state
  • Under the scheme various incentives and subsidies are provided on procurement and capital investment on the land, plant and machinery
  • Production linked incentives and capacity expansion incentives are also provided thereby
  • The scheme mainly targets the development of the ESDM sector and the economy of the state in the long run

Provisions under the scheme:

  • Under the scheme, government is going to provide subsidies on procurement/ purchase of land
  • About 25% capital investment subsidy will be provided mainly to the industries which are setting up in areas other than rural and urban areas of Bengaluru
  • This capital investment subsidy will be provided on the cost of its procurement from Karnataka Industrial Areas Development Board (KIADB) or any other government agencies. The land area won’t exceed 50 acres limit.
  • About 20% capital investment subsidy will be provided on Plant and Machinery including used/ second hand/ refurbished/ imported or domestically purchased.
  • Apart form the 25% and 20% subsidies, 100% reimbursement of stamp duty and registration charges and 100% reimbursement of land conversion fee is also provided.
  • In case of commercial production, power tariff reimbursement of Re. 1 per unit for 5 years will be provided along with 100% exemption from electricity duty for the same duration.
  • Production linked incentives will be provided based on the annual sales turnover in the state and across.
  • Incentives provided to the manufacturing/ assembly unit would not exceed 100% value of the fixed asset created by the unit
  • Overall products and activities eligible for incentives under the scheme are Manufacturing and design of electronics products, semiconductor manufacturing and design, electronic manufacturing services, solar cells manufacturing, LED, and other electronic verticals.
  • Incentives will be provided for new capital investments or capacity expansion of the existing units for a period of 5 years from the date of announcement.

Key Points:

  • Karnataka government approved the Special Incentives Scheme for boosting the ESDM sector in the state thereby providing subsidies and incentives to attract investment
  • This scheme was approved and an official press release which stated the scheme details was released
  • Incentives and Subsidies under the scheme are provided for new capital investment and capital expansion of the existing units
  • The incentives under this scheme can be availed along with any other incentives scheme/ policy of central government but not of state government
  • Through this scheme an investment of about Rs. 5000 cr. is expected by the state along with generation of 43000 direct employment opportunities over next 5 years

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