The government on Tuesday tightened its oversight over the selected applicants under the Production Linked Incentive for white goods by coming out with a revised formula for calculating the value of production for captive use, sales to group companies and related parties.
Along with the revised formula for determining the value of related-party sales, the changes in the guidelines also provide for verification of incentive claims by the Project Management Agency. The implementing agency for PLI in white goods is IFCI. The agency has also been given the task of recommending the quantum of incentives to manufacturers.
The changes in rules also accord the administrative ministry – in this case Department for Promotion of Industry and Internal Trade (DPIIT) – the authority to visit the manufacturing sites of the beneficiaries. Earlier this power was available to the management agencies.
These changes follow the differences over the quantum of incentive claims that mobile phone maker Samsung had made. The government had disputed the amount sought by the company. After the re-verification of output numbers, the issue has been settled. Against the original claim of Rs 900 crore, the company will be getting Rs 500 crore for incremental production in FY 21, sources had said earlier.
Under the revised formula, for determining the value of sales to related parties the guidelines also allow for using cost plus criteria for determining arm’s length price provided it is certified by a Cost Accountant. The other widely accepted definition of the arm’s length principle (sale to unrelated parties) remains. In the use of cost-plus criteria, the new rules allow for adding a 5% margin for calculating per unit output.
The value of additional output using new investments is the criteria for calculating and claiming the incentives by the eligible companies under the PLI, which is right now running for 14 sectors. The quantum of incentive varies from 4-6% on white goods that include Air Conditioners and their parts and LEDs.
The fresh guidelines also lay down that in case the companies get paid incentives on the basis of claims which letter do not match with the statutory compliances then the extra money will have to be returned with incentives.
However, in relief to companies, the date for filing for claims for a financial year has been pushed back to 15th January of the next year from October 31st.
The companies also can take three years instead of two from the date of commercial production to inform the government about the additional production site that they have set up.
For calculating the quantum of investments, the pending tool room would be added to the plant and machinery.