What’s New in RIPS 2022? A Policy to Enhance Industrial Growth and Development in Rajasthan

The Rajasthan Investment Promotion Scheme 2022 (RIPS 2022) is a new policy launched by the government of Rajasthan to attract investment and generate employment opportunities in the state. The policy aims to provide a competitive and conducive environment for industrial growth and development in Rajasthan. RIPS 2022 covers eight priority sectors: Manufacturing, Services, Sunrise sectors, MSMEs, Startups, Industrial Parks, Logistics, Warehousing & Cold Chains, R&D, GC & Test Labs and Renewable Energy Plants. The policy offers a standard package of incentives for all eligible enterprises based on their investment size and location. The policy also provides additional incentives for enterprises in backward areas, most backward areas, thrust sectors and sunrise sectors. Moreover, the policy allows customized package of incentives for mega projects with investment above INR 500 crore or employment above 1000 persons; or with investment above INR 250 crore or employment above 500 persons in sunrise sectors. RIPS 2022 was launched on October 7, 2022 and will be valid till March 31, 2027. It offers more generous incentives than RIPS 2016, such as higher percentage of SGST reimbursement, interest subsidy, patent registration subsidy, quality certification subsidy, power subsidy.

RIPS 2022 covers eight priority sectors, out of which four are new sectors that were not covered in RIPS 2016. These new sectors are:

  • Sunrise sectors: These include sectors that have high potential for growth and innovation in the future, such as Electric Vehicles, Data Centers, IT Services, Artificial Intelligence, Internet of Things, Blockchain, Robotics, Drones, Augmented Reality, Virtual Reality, Gaming and Animation, etc.
  • MSMEs: These include micro, small and medium enterprises that are engaged in manufacturing or service activities and have investment and turnover limits as per the MSME definition by the Government of India.
  • Startups: These include enterprises that are recognized as startups by the Department for Promotion of Industry and Internal Trade (DPIIT) or by the Rajasthan Startup Council (RSC) and have a valid certificate of recognition.
  • Industrial Parks, Logistics, Warehousing & Cold Chains: These include industrial parks that are developed by private developers or co-developers or SPVs or JVs with RIICO or any other government agency; logistics parks that are developed by private developers or co-developers or SPVs or JVs with RIICO or any other government agency; warehousing facilities that are developed by private developers or co-developers or SPVs or JVs with RIICO or any other government agency; and cold chain facilities that are developed by private developers or co-developers or SPVs or JVs with RIICO or any other government agency.

RIPS 2022 has reduced the minimum investment threshold for both manufacturing and service sectors compared to RIPS 2016. The minimum investment threshold in RIPS 2022 is as follows:

  • Manufacturing sector: INR 5 crore
  • Service sector: INR 1 crore
  • Sunrise sectors is INR 10 crore
  • MSMEs, it is INR 25 lakh
  • Startups, it is INR 10 lakh
  • Industrial parks, logistics, warehousing and cold chains, it is INR 50 crore

RIPS 2016 had a provision for customized package of incentives for mega projects with investment above INR 500 crore or employment above 1000 persons. RIPS 2022 also has a provision for customized package of incentives for mega projects with investment above INR 500 crore or employment above 1000 persons. However, RIPS 2022 also allows customized package of incentives for projects with investment above INR 250 crore or employment above 500 persons in sunrise sectors.

The standard package of incentives in RIPS 2022 includes:

  • Capital subsidy (CS): A one-time subsidy on eligible fixed capital investment (EFCI) ranging from 10% to 50% depending on the sector and location, subject to a maximum limit of INR 50 crore.
  • Tax linked incentive (TLI): A subsidy equivalent to 100% of EFCI or SGST paid, whichever is lower, for a period ranging from 7 to 15 years depending on the sector and location.
  • Employment creation subsidy (ECS): A subsidy on wages paid to eligible employees ranging from INR 10,000 to INR 1 lakh per employee per year for a period ranging from 3 to 7 years depending on the sector and location.
  • Exemption from electricity duty (ED): A full or partial exemption from electricity duty for a period ranging from 5 to 10 years depending on the sector and location.
  • Exemption from stamp duty (SD) and conversion charges (CC): A full or partial exemption from stamp duty and conversion charges on purchase or lease of land or building for industrial use depending on the sector and location.
  • Exemption from mandi fee (MF): A full exemption from mandi fee on purchase of agricultural produce for industrial use.
  • Exemption from entry tax (ET) on capital goods or equipment: A full exemption from entry tax on import of capital goods or equipment required for setting up or expansion of an enterprise.
  • Interest subsidy (IS): A subsidy on interest paid on term loan taken from banks or financial institutions ranging from 3% to 6% per annum for a period ranging from 5 to 7 years depending on the sector and location, subject to a maximum limit ranging from INR 30 lakh to INR 50 lakh per annum.
  • Land allotment rebate (LAR): A rebate on land allotment price ranging from 25% to 50% depending on the sector and location, subject to a maximum limit ranging from INR 50 lakh to INR 5 crore.

RIPS 2016 had a maximum limit of INR 50,000 per employee per year for employment generation subsidy (EGS). RIPS 2022 has increased the maximum limit to INR 1 lakh per employee per year for employment creation subsidy (ECS).

RIPS 2016 had a ceiling of 75% of total eligible fixed capital investment (EFCI) for investment subsidy (SGST reimbursement). RIPS 2022 has removed the ceiling and allows tax linked incentive (TLI) equivalent to 100% of EFCI or SGST paid, whichever is lower

RIPS 2016 had a provision for interest subsidy (IS) of up to 7% per annum for a maximum period of seven years subject to a maximum limit of INR 1 crore per annum. RIPS 2022 has revised the provision for interest subsidy (IS) as follows:

  • For loan amount up to INR 5 crore: IS of 6% per annum for a maximum period of five years subject to a maximum limit of INR 30 lakh per annum.
  • For loan amount above INR 5 crore and up to INR 10 crore: IS of 4% per annum for a maximum period of five years subject to a maximum limit of INR 40 lakh per annum.
  • For loan amount above INR 10 crore and up to INR 50 crore: IS of 3% per annum for a maximum period of five years subject to a maximum limit of INR 50 lakh per annum.

RIPS 2016 had a provision for land allotment rebate (LAR) of up to 50% on prevailing reserve price or allotment price, whichever is higher, subject to a maximum limit of INR 25 lakh. RIPS 2022 has increased the provision for land allotment rebate (LAR) as follows:

  • For investment up to INR 10 crore: LAR of up to 50% on prevailing reserve price or allotment price, whichever is higher, subject to a maximum limit of INR 50 lakh.
  • For investment above INR 10 crore and up to INR 100 crore: LAR of up to 50% on prevailing reserve price or allotment price, whichever is higher, subject to a maximum limit of INR 1 crore.
  • For investment above INR 100 crore: LAR of up to 50% on prevailing reserve price or allotment price, whichever is higher, subject to a maximum limit of INR 5 crore.

In conclusion, RIPS 2016 and RIPS 2022 are two different policies that have different features and benefits for different types of enterprises. RIPS 2022 is more comprehensive and flexible than RIPS 2016 as it covers more sectors, reduces the minimum investment threshold, increases the maximum limit of subsidies and rebates, removes the ceiling of EFCI for TLI, revises the interest subsidy rates and periods, and allows more scope for customization. Therefore, RIPS 2022 can be seen as an improvement over RIPS 2016 in terms of promoting industrial development and economic growth in Rajasthan.