Production Linked Incentive Scheme (Pli) for Textiles (Mistry and Shah Global Solutions Private Limited )

Overview of the Scheme

Taking steps forward towards the vision of an ‘Aatmanirbhar Bharat’, the Government led by Hon’ble Prime Minister, Shri Narendra Modi, has approved the PLI Scheme for Textiles for MMF Apparel, MMF Fabrics, and 10 segments/ products of Technical Textiles with a budgetary outlay of Rs. 10,683 crore. PLI for Textiles along with RoSCTL, RoDTEP, and other measures of Government in the sector e.g. providing raw material at competitive prices, skill development, etc will herald a new age in textiles manufacturing.

PLI scheme for Textiles will promote the production of high-value MMF fabrics, Garments, and Technical Textiles in the country. The incentive structure has been so formulated that the industry will be encouraged to invest in fresh capacities in these segments. This will give a major push to the growing high-value MMF segment which will complement the efforts of the cotton and other natural fiber-based textiles industry in generating new opportunities for employment and trade, resultantly helping India regain its historical dominant status in global textiles trade.

Incentives under the scheme will be available for 5 years period i.e. during FY 2025-26 to FY 2029-30 on incremental turnover achieved during FY 2024-25 to FY 2028-29 with a budgetary outlay of Rs. 10,683crore. 

However, if a company is able to achieve the investment and performance targets one year early then, they will become eligible one year in advance starting from 2024-25 to 2028-29 i.e. for 5 years. 

The objective of the Scheme

The Production Linked Incentive (PLI) Scheme is intended to promote the production of MMF Apparel & Fabrics and, Technical Textiles products in the country to enable Textiles Industry to achieve size and scale; to become competitive and a creator of employment opportunities for people.

Products Details

The scheme proposes to incentivize MMF Apparel listed at Annexure-I, MMF Fabrics listed at Annexure-II, and 10 segments of Technical Textiles products listed at Annexure-III. Turnover of MMF Apparel, Fabrics, and products of Technical Textiles will be counted based on product description in GST invoice at 8-digit HS Code.

Scheme Duration

The scheme shall be valid for a period of five years up to 2029-30. The gestation period for both parts of the scheme will be of two (2) years i.e. FY: 2022-23 to FY: 2023-24.

Time Limit for Application

The application window for registration under the scheme shall be opened for the period from 15th November 2021 to 15th January 2022 (inclusive) on the online portal.

Duration of the Scheme

The scheme is for a fixed period of five years. This 5 year period will start immediately after the gestation period is over or the year in which investment is completed and production of Notified products are started.

The incentive could be claimed on incremental turnover for consecutive 5 years only as under:

• In case the investment is completed in FY 2022-23 and threshold turnover is achieved in FY 2023-24, an incentive on it may be claimed in FY 2024-25. However, in such cases, benefits of the scheme shall be available up to the performance of FY 2027-28 only. 
• Only such sales will be counted, which are transacted through normal banking channels.

Eligibility Criteria

1. Minimum Investment of 300 Cr. and Turnover of 600 Cr.
2. Minimum Investment of 100 Cr. and Turnover of 200 Cr.

Scheme Part 1:  Minimum Investment of 300 Cr. and Turnover of 600 Cr.

Any Person

includes firm / company

300 Cr. Minimum Investment

willing to invest a minimum of ₹300 Crore in Plant, Machinery, Equipment and Civil Works (excluding land and administrative building cost) to produce products of Notified lines

600 cr. Minimum Turnover (T/O)

Such companies under the scheme will be eligible to get an incentive when they achieve a minimum of ₹600 Crore turnover by manufacturing and selling the products Notified under this scheme.

2 Years Gestation Period to achieve T/O

The participating company is expected to achieve this required turnover after a gestation period of two years, i.e. in FY 2024-2025, which will be termed as year 1

Incremental Turnover @ 25 %

Incentives in the subsequent years will be provided on achieving a minimum additional incremental turnover of 25% over the immediately preceding year’s turnover up to year 5.

However, the applicant will form a separate company under the Companies Act, 2013, before the commencement of investment under this scheme.

Scheme Part 2:  Minimum Investment of 100 Cr. and Turnover of 200 Cr.

• In case the investment is completed in FY 2022-23 and threshold turnover is achieved in FY 2023-24, an incentive on it may be claimed in FY 2024-25. However, in such cases, benefits of the scheme shall be available up to the performance of FY 2027-28 only.
• Only such sales will be counted, which are transacted through normal banking channels. 

Read More:
Schemes for Rebate of States and Central Taxes and Levies(RoSCTL) and Additional Ad-hoc Incentive for export of garments and made-ups.

Cap on Incentive

There will be a provision of the cap of 10% over the prescribed minimum incremental turnover growth of 25% for the purpose of calculation of incentives from Year 2 onward. Turnover achieved beyond that cap will not be taken into account for the calculation of incentive. However, for Year 1 this cap of 10% will be applied over a turnover of two times of investment made under the scheme. Turnover achieved beyond two times of the investment + 10% shall not be accounted for calculation of incentives in Year 1.

* In case if the minimum threshold of turnover range for the incentive is not achieved in any year, that year would be considered ‘Dies Non-Year’ and would not be considered for calculation. Instead, the incremental turnover for next year after Dies Non-year would be calculated on the basis of the actual turnover of the previous successful year.

Selection Criteria

List of Notified Town

Common Conditions for both parts of the scheme:

• Notified products removed from the factory under GST Invoice shall only be taken into account for the calculation of incremental turnover provided remittances against such trade are realized/received through normal banking channels.
• Only manufacturing companies registered in India will be eligible to participate under the scheme. Participating companies will have to undertake processing and operation activities in their own factory premises as prescribed in the scheme guidelines. Only project proposals envisaging processing and operation activities able to enhance value by not less than 60% in integrated fiber/yarn to fabric, garment & technical textiles will be selected. However, for the proposal of independent fabrics processing house, this required minimum value enhancement will be only 30%; 
• Turnover achieved from trading and outsourced job work will not be accounted for. The goods which are manufactured by the company registered under the scheme shall only be eligible for the incentives. In other words, goods manufactured by other manufacturer or unit of same group company shall not be accounted for calculation of incremental turnover;
• The Applicant once selected under the scheme shall form a new company before commencement of investment. This new company will be called “Participant or beneficiary” in the scheme.
• The investment made by the Participant company by 31st March 2024 will be considered. However, there will be no restriction for making a further investments for enhancing manufacturing capabilities.
• Only one company of a group will be allowed to be registered for PLI for Textiles and none of their other group companies will be eligible for participation in this scheme as a second participant. However, the group may make more than one (1) application for consideration but they will have to take a decision at the time of selection regarding the proposal they want to take forward in case more than one (1) of their proposals are shortlisted on the basis of the transparent selection process;
• This Scheme does not preclude beneficiary for duty remission/duty exemption/duty neutralization provided by Government of India or for making application for State Government schemes;
• Manufacturing and sale of Notified products shall only be considered as permitted activities under the scheme. However, Participant can produce products other than Notified ones also but payments received against such sales shall not be accounted for incremental turnover.
• The investment made in anticipation from the date of Scheme Notification shall also be accounted for calculation of threshold investment if their proposal is approved for participation under the scheme.
• The Applicant should have PAN/GST/DIN.
• Participating companies shall have to do minimum value addition in their own registered factory premises, as defined above.
• Eligible Investment made in terms of Scheme guidelines after the date of notification shall be considered for threshold investment under the Scheme. i.e. after 24^th September 2021.
• The Applicant shall declare the notified ITC HS lines in which the Applicant intends to do business during the application phase. Lines once selected should be adhered to till the scheme’s duration. In case of any changes, prior approval of the authority will be required.
• Notified goods/products manufactured by the only registered company/units under the scheme shall be eligible for the incentives. In other words, goods/products manufactured by units other than registered ones even of the same group company shall not be accounted for calculation of incremental turnover.
• Notified products sold under GST Invoice indicating 8 digit HS code shall only be taken into account for the calculation of incremental turnover.
• Foreign (non-resident) investment in the Participant’s Company shall be in compliance with the norms delineated under the Consolidated FDI Policy 2020, as amended from time to time.
• Participants are eligible to apply for duty remission, duty exemptions, duty drawback, and/or other applicable schemes administered by the Government of India or the State Governments.
• The Participant, while dispatching notified products out of the factory, shall ensure to put “Make in India” tag on each product.
• No Child labor or bonded labor shall be engaged in the factory.
• Employment opportunities to Economically and Socially weaker sections shall also be ensured by providing jobs in the newly formed company.
• The participant should commit to setting up manufacturing facilities to manufacture Notified product(s) along with appropriate quality and testing facilities having conformity to prescribed BIS Standards commensurate with committed incremental sales.
• The Applicant and its group company(ies) should neither have been declared as bankrupt or defaulter or reported any fraud by any bank or financial institution or non-banking financial company or placed under black list/denied entity list by any state or central Government department/agencies.
• The Participant shall maintain consumption and inventory register for inputs and use of raw materials for making Notified products. The records shall be preserved for five years after availing incentive for each year or till the audit is completed by Ministry, whichever is later.
• The Participant shall submit an undertaking duly Affirmed and Notarized while making application for incentives that statement and documents submitted are true and genuine. In case amount claimed is found to be incorrect/excess, the same shall be refunded with 15% simple interest to the authority authorized by MoT for raising such demand, within a month without any protest /resistance or dispute. In case of failure to refund the amount so demanded, the same shall be recovered as an arrear of land revenue through a respective district collector in addition to other penal action.
• In case any Participant fails to achieve the prescribed minimum net incremental turnover for any given year, the Participant shall not be eligible for claiming incentive for that particular financial year. However, the Participant will not be restricted from claiming incentive for subsequent years during the tenure of the Scheme, provided eligibility criteria of committed investment and threshold of net incremental turnover are met for such subsequent financial years. In case of such delay the number of years of incentive will be less than 5 for such participants.
• The incremental turnover of notified product(s) should be commensurate with created production capacity under the scheme.
• The applicant, in its application, shall declare and inform the PMA regarding their yearly plan, for incentive planning and statistical purposes e.g. Domestic Value Addition, Employment Generation, and Exports during the tenure of the scheme.
• The applicant shall pay Rs. 50,000/-(Rupees Fifty Thousand) for registration under the scheme and Rs.1,00,000/(Rupees One Lakh) for claiming incentives, as an application processing fee with each application.

The incentive shall be computed as follows:

Net Incremental Sales within cap of Notified Product(s) excluding taxes x Rate of Incentive for the Year

Where,

• Notified Product(s) shall be as defined in this scheme and stated in the approval letter issued to the selected applicant.
• Net Incremental Sales shall be Turnover of the applicant in the notified product(s) manufactured by the applicant minus the Turnover for notified products of the applicant in the immediately preceding year during the scheme period.
• In case of captive consumption of the notified product(s) or sale of notified product (s) by the applicant only to group companies, the gross turnover of the notified product(s) shall be computed as under:
• Notified products invoiced as per GST for sale shall only be taken into account for incremental turnover in case of captive consumption of upstream products manufactured by the beneficiary.
• In case a selected applicant is selling the notified products to a group company and also to a non-group company, the sale price offered to a group or non-group company, whichever is lower, shall be considered for determining the total value of the transaction between the related parties.

Procedure for Disbursement of Incentives

• An Application for claiming incentives complete in all respect shall be filed online by the applicant by 31st December of the immediate subsequent financial year of the performance year. For example: For the performance year 2024-2025, application for claim of incentive shall be made by 31.12.2025
• The applicant shall submit a claim for disbursement of incentive on annual basis for the sales made in a performing financial year along with its audited financial statements. Single application for claims shall be made only once, no supplementary application for the claim shall be accepted.
• The PMA shall process a claim for disbursement of incentive within 45 days from the date of receipt of such claim along with all supporting documents and make appropriate recommendations to MoT.
• Upon approval of claims by Sanctioning Authority/Approving Authority, the disbursement of incentive shall be done by way of Direct Bank Transfer through PFMS or through any other mechanism of adjustment in the account of Participant Company only by PMA/Pay and Account Officer (PAO) within 15 days from the date of approval of the competent authority.
• In case of excess claims disbursed, the applicant shall reimburse MoT for any incentive amount refundable along with 15% simple interest calculated from the date of disbursement of incentive and actual date of refund by the applicant.

Expenditure and Investment:

• Expenditure on consumables and raw material used for manufacturing shall not be considered as Investment.
• The date of capitalization of the investment in the audited financial statement of the selected applicant shall be considered as the date of investment under the Scheme.
• The heads of Investment, based on which eligibility is being determined, should be capitalized in the audited financial statement of the applicants as certified by the Statutory Auditor.
• No second hand/ used/ refurbished plant, machinery, equipment, utilities shall be used to manufacture the notified product(s).
• The applicant must ensure adequate insurance cover on all movable and immovable assets against natural or man-made disasters like floods, cyclones, earthquakes, tsunamis, etc. has been taken.

Insurance:

• All notified products manufactured by the selected Applicants shall be in conformity with applicable regulatory norms, quality standards and guidelines issued by the concerned authorities from time to time. If Ministry of Textiles may deem necessary, it may ask for quality reports from the internationally accredited laboratories and testing centers.

Conformity to Quality Standards:

Participant shall intimate the PMA of any change in the shareholding pattern during the tenure of the Scheme, after updating with the Registrar of Companies (RoC) and the resultant change in Successor-in Interest, if any shall Participant shall intimate the PMA of any change in the shareholding pattern during the tenure of the Scheme, after updating with the Registrar of Companies (RoC) and the resultant change in Successor-in Interest, if any shall be intimated by PMA for approval of MoT to consider disbursal of incentives.

Change in Ownership:

• In case of change in successor-in-interest, all Investments undertaken by the Participant shall be considered for determining the eligibility of the successor-in-interest, subject to approval and compliance with any other condition stipulated by the MoT, as may be deemed appropriate. Achievement of prescribed incremental turnover after completion of benchmark investment will determine the eligibility under the scheme for the successor company.

Recovery Mechanism and penal provision:

An internal Audit mechanism shall be put in place. On scrutiny of documents under post-audit mechanism, if it is found that excess claim has been made and/or excess payments have been made to the applicant, the Nodal section of MoT will raise demand on the applicant for the recovery. The Participant shall be liable to refund the same within 30 days from the date of receipt of the demand Notice with 15% interest to the Authority. If it is established at later stage that claim under the scheme has been availed by mis-declaration or by submitting fabricated documents, Joint Secretary/Trade Advisor will adjudicate the case after issuing Show Cause Notice to the Participant company as per the principle of natural justice. The Participant in such cases shall be liable for penal action and the amount of penalty shall not be less than the excess payment made and up to 5 times of additional claim value. Other action as deemed appropriate under laws of the land will also be taken in such cases.

The penalty amount shall be deposited in the consolidated fund of India account. In case the penalty amount is not paid, the same shall be recovered as an arrear of land revenue through the respective district collector and magistrate under whose jurisdiction the entity falls.

Definitions:

• Applicant:

An applicant for the purpose of the Scheme shall be any person including a company/firm/LLP/trust incorporated in India. The Applicant should be willing to manufacture one or more of the notified products from the category of MMF Apparel, MMF Fabrics, and Technical Textiles. The Applicant shall make an application for seeking “Letter of Approval” and benefits under the Scheme. The Applicant once selected under the scheme shall be considered as a Participant.

• Audit:

Means the examination of records, returns and other documents maintained or furnished by the participant under these guidelines or under any other law for the time being in force to verify the correctness of turnover declared, products manufactured, taxes paid, refund claimed and input tax credit availed, and to assess his compliance with the provisions of these guidelines;

• Consumption and inventory Register:

means register for maintaining inventory and consumption of inputs and output records by the participant;

• Capital Goods:

Goods mean, the value of which is capitalized in the books of account of the participant, claiming the input tax credit and which are used or intended to be used in the course or furtherance of business;

• Date of Commercial production:

means the date on which the applicant raises the first GST invoice for the sale of Notified Product(s) manufactured by the applicant under the Scheme.

• Financial Year:

means a Financial Year begins on 1st April of a calendar year and ends on 31st March of the following calendar year.

• Gestation Period:

means period allowed for establishing a new company and manufacturing factory for the production of Notified products by investing minimum prescribed threshold investment. (FY: 2022-23 to FY: 2023-24) will be gestation period for Scheme Part-1 and Scheme Part-2. However, investment can also be started after notification of the scheme in anticipation of getting a “Letter of Approval”.

• Group Companies:

As defined in the FDI Policy Circular of 2020, Group Company(ies) shall mean two or more enterprises which, directly or indirectly, are in a position to:

1. Exercise twenty-six percent or more of voting rights in another enterprise; (or)
2. Appoint more than fifty percent of members of the board of directors in the other enterprise.

• Incremental Sales:

means the additional sale of Notified products over the immediate preceding year for which payments have been received through normal banking channels only. Incentives shall be calculated on incremental turnover only.

• Input:

Any good other than capital goods used or intended to be used for manufacturing of resultant products;

• Investment:

means an amount of total investment excluding land and administrative building to be made by the applicant for setting up a factory for manufacturing of Notified products. It will include expenditure incurred on New Plant, Machinery, Equipment, and Associated Utilities, relating to the facilities set up for manufacturing of the notified product(s), as per detail given below.

Investment:

• Conditions for Investment:

Investment in Plant, Machinery and Equipment under these guidelines shall include Investment in new plant, machinery, equipment, and associated utilities as well as tools, dies, molds, jigs, fixtures (including parts, accessories, components, and spares thereof) of the same, used in the design, manufacturing, assembly, testing, packaging or processing of any of the manufactured notified product(s). It shall also include expenditure on the packaging, freight/transport, insurance, and erection and commissioning of the plant, machinery, equipment, and associated utilities.

• Associated utilities would include captive power and effluent treatment plants, essential equipment required in operations areas such as Water & Power supply and control systems. Associated utilities would also include IT and ITES infrastructure related to manufacturing including servers, software, and ERP solutions. All non-creditable taxes and duties shall be included. Such investments shall be used for determining eligibility under the Scheme.

The Plant, Machinery, and Equipment should be purchased or leased in the name of the participant. In cases where these are being leased, the lease should be in the nature of a financial lease* within the meaning of Accounting Standard 19 – Leases or Indian Accounting Standard (Ind-AS)-116 Leases, as may be applicable to the participant, as notified by Ministry of Corporate Affairs or any other appropriate authority from time to time.

• The Plant, Machinery, and Equipment should be procured or leased through a legally valid document after payment of applicable taxes and duties.
• A finance lease is a lease that transfers substantially all the risks and rewards incident to ownership of an asset.
• A finance lease is a lease that transfers substantially all the risks and rewards incident to ownership of an asset.
• Examples of situations that would normally lead to a lease being classified as a finance lease are:
• the lease transfers ownership of the asset to the lessee by the end of the lease term;
• the lessee has the option to purchase the asset at a price that is expected to be sufficiently lower than the fair value at the date the option becomes exercisable such that, at the inception of the lease, it is reasonably certain that the option will be exercised;
• the lease term is for the major part of the economic life of the asset even if the title is not transferred;
• at the inception of the lease the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset;
• the leased asset is of a specialized nature such that only the lessee can use it without major modifications being made.
• The Plant, Machinery, and Equipment of the Project approved under the Scheme shall be used in a regular course for manufacturing of the notified Product(s) that are approved in the “Letter of Approval” issued by PMA/MoT. This does not preclude the usage of such machinery for the manufacturing of other goods.
• Participant Company can set up more than one unit for the production of notified products under this scheme. They will have to declare this along with the application.
• Associated Utilities:

Use of associated utilities is permitted for an existing manufacturer, in case new investments are made. However, the investment already made by them shall not be counted under the scheme.

• Fresh investment in associated utilities commensurate with the manufacturing of notified product(s) shall be considered as Investment for determining eligibility under the Scheme.

• Ineligible investment:

Investments in land and administrative building e.g. office and guest house building will not be covered under the Scheme. Only investment in factory building for housing the machinery and equipment (Technical Civil Works required for the project or unit) will be considered for determining the threshold investment eligibility under the Scheme.

• Job work:

Means processing or working upon of raw materials or semifinished goods supplied to job worker, so as to complete a part of process resulting in manufacture or finishing of an article or any operation which is essential for aforesaid process;

• Letter of Approval:

means a letter issued by PMA /MoT for authorizing commencement of investment and starting production under the scheme. This will be issued after scrutiny of his eligibility by the Selection Committee.

• Manufacturer:

Company registered under the scheme for manufacturing of the notified products.

• Manufacturing:

In accordance with Central Goods and Services Tax (CGST) Act, 2017, manufacturing shall mean processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use and the term “manufacturer” shall be construed accordingly. Trading/job-working shall not fall under the definition of manufacturing.

• Notified Product(s):

50 HS lines of Manmade Fibre (MMF) Apparel, 42 HS lines of MMF Fabrics at 8 digits and products of Technical Textiles shall only be eligible as per Appendix-IA, IB and IC.

• Letter of Approval:

means a letter issued by PMA /MoT for authorizing commencement of investment and starting production under the scheme. This will be issued after scrutiny of his eligibility by the Selection Committee.

• Manufacturer:

Company registered under the scheme for manufacturing of the notified products.

• Manufacturing:

In accordance with Central Goods and Services Tax (CGST) Act, 2017, manufacturing shall mean processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use and the term “manufacturer” shall be construed accordingly. Trading/job-working shall not fall under the definition of manufacturing.

• Person:

Both natural and legal and includes an individual, firm, LLP, society, company, corporation or any other legal person;

• Performance Year:

Means the year in which threshold investment and threshold incremental turnover is achieved. FY 2024-2025, 20252026, 2026-2027, 2027-2028, 2028-2029 would be performance years.

Related Party(ies):

Related party means as defined u/s 2(84) of the GST Act. Persons shall be deemed to be related if they fall under any of the categories below:

• Officer or director of one business is the officer/ director of another business
• Businesses legally recognized as partners
• An employer and an employee
• Any person who holds at least 25% of shares in another company, either directly or indirectly
• One of them controls the other directly or indirectly
• They are under common control or management
• The entities together control another entity
• The promoters or managerial persons are members of the same family

Persons include a legal person who can be individuals, HUF, company, firm, LLP, co-operative society, a body of individuals, local authority, government, or an artificial juridical person. It also includes entities incorporated outside India. Persons who are associated with one another’s business or is a sole agent or sole distributor or sole concessionaire shall be deemed to be related.

• Successor-in-Interest:

means the new or reorganized entity formed after the merger, de-merger, acquisition, transfer of business or significant change in ownership of an applicant.

• Threshold Investment:

means a minimum prescribed investment as per the Scheme.

• Threshold Turnover/Incremental turnover:

means a minimum prescribed turnover for year 1 or incremental turnover over the immediate preceding year in subsequent years.

• Traded Goods:

Products, where no manufacturing processing of raw material or inputs in any manner is carried out to change the form of the product by the Applicant Company and the product, is purchased and sold without any substantial value addition shall be treated as “traded goods”, for the purpose of the Scheme.

• Value-Addition formulae:

A-B

VA= ——— × 100 B

A= Products sale value declared in GST Invoice excluding GST. The B= Purchase value of Inputs/raw materials excluding Duties/Tax/Cess

• Raw material:

means input(s) required/used for manufacturing of finished goods. These inputs may either be in a raw/natural/unrefined/ unmanufactured or manufactured state;

• Minimum value addition:

For the purpose of this scheme, minimum value addition means value addition of 60% in integrated fiber/yarn to fabric, garment & technical textiles segments. However, for the independent fabrics processing industry the required minimum value addition will be 30%.

• Turnover:

means Gross Sale Turnover of a Company reported to the Statutory Authorities, the value of goods cleared under GST Invoices and actual remittances realized/payment received through normal banking channel from the sale of notified goods/products;

• Transaction Value:

means the value declared on GST invoices excluding duty/taxes and remittance for such transactions are realized through normal banking channels only.

About Contributor

Mistry & Shah Global Solutions Private Limited
Contact No: 9426049084,8000845035
Email : ketan@mistryandshah.com, Kunal.soni@mistryandshah.com

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Mistry & Shah Global Solutions Private Limited
Contact No: 9426049084,8000845035
Email : ketan@mistryandshah.com, Kunal.soni@mistryandshah.com