Subsidy under CLCSS Cannot be Claimed Where Buyers Credit is Availed

Trigger for this topic is a question that a reader asked:

“MSME manufacturing  unit doing expansion of machinery by purchasing machinery from abroad   get credit linked capital subsidy scheme (CLCSS) from Central Government.

MSME unit avails buyers credit for payment to overseas buyer and sanctioned term loan is not utilised . Can the unit be eligible for subsidy? ”

SubsidyBelow article gives basic details about Credit Linked Capital Subsidy Scheme and revert to above query.

Central Government and State Government runs various subsidy schemes for Indian Manufacturer for setting up new plant or expanding the existing plant. One of these subsidy scheme is Credit Linked Capital Subsidy Scheme (CLCSS).  This scheme was launched in October-2000 and has been revised over the years.

Summary and Benefit of the Scheme

  1. Eligible for new as well as existing units
  2. Ceiling on the loan amount under the scheme is Rs. 1 Crore.
  3. 15% Capital subsidy on loan amount or Rs. 15 lacs whichever is minimum.
  4. Scheme is for purchase of plant and machinery
  5. Calculation of admissible subsidy will be done with reference to the purchase price of plant and machinery instead of term loan disbursed to the beneficiary unit
  6. Replacement of existing equipment/technology with the same equipment/technology will not qualify for subsidy under this scheme, nor would the scheme be applicable to units upgrading with second hand machinery.

In the case of imported machinery, the following shall be included while calculating the value of plant & machinery, namely :-

  1. Import duty (excluding miscellaneous expenses as transportation from the port to the site of the factory, demurrage paid at the port);
  2. Shipping charges;
  3. Custom clearance charges; and
  4. Sales Tax.

Process to be Followed

  1. Bank sanctions term loan to SSI Unit
  2. Bank will enter into General Agreement (GA) with concerned SSI  unit on behalf of Government of India.
  3. SSI Unit submits application for assistance under the CLCSS as per required format.
  4. Bank (Nodal Agency) approves CLCSS subsidy for SSI unit as per CLCSS regulation.
  5. Bank release the subsidy amount with each installment of loan in a manner proportionate to the amount of term loan disbursed (on pro- rata basis), subject to the ceiling of the term loan/ subsidy amount as per applicable guidelines of the CLCSS.
  6. Subsidy amount once issued, is kept in Fixed Deposit for 3 years. The beneficiary unit shall remain in commercial production for at least three years after installation of eligible plant & machinery on which subsidy under CLCSS has been availed. If the unit fulfills the condition, the FD will be transferred to unit’s account after three years.

Documents Required

  1. Copy of SSI Registration Certificate
  2. Copy of Term Loan Sanction Letter
  3. Copy of Bank Term Loan Statement of account showing release dates.
  4. Copy of machinery invoice(s) with the bill of entry (imports).
  5. Audited Balance Sheet for the last 3 years prior to loan sanctions, or copy of project report submitted to bank
  6. Company letter head  – 6 Number
  7. Stamp Paper – Rs. 200/- in the name of the unit.
  8. Owner’s Details: Name of proprietor / partner / Directors of Company. Their age, father’s / spouse’s name, residential address. Date of installation of each machine and date of put to commercial use. Increase in Capacity after installation of Machinery – Monthly – Profit and Loss, Sales etc.

For further details CLCSS, please refer article in reference section.

Revert to Above Question: Whether Both Buyers Credit and CLCSS can be used by Importer

In CLCSS,  disbursal of Term Loan is one of the condition.  As seen in earlier articles Buyers Credit on Capital goods,  incase of buyers credit term loan is not immediately disbursed and depending on the requirement of importer, it can either disbursed at end of 3 years or before.

Incase of buyers credit, as term loan is not disbursed, Importer will not be able to claim subsidy under CLCSS.

Importer will have to choose between either one of them.

Reference 

  1. Credit Link Capital Subsidy Scheme for Technology Upgradation
  2. List of Machines Covered in CLCSS
  3. SIDBI : Credit Linked Capital Subsidy Scheme
  4. FAQ on CLCSS
  5. Sample Agreement for Financial Assistance under Credit Linked Capital Subsidy Scheme for Technology Upgradation of the Small Scale Industries
  6. Application Form for CLCSS
  7. RBI Master Circular: Lending to Micro, Small & Medium Enterprise (MSME) Sector)
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12 thoughts on “Subsidy under CLCSS Cannot be Claimed Where Buyers Credit is Availed”

  1. you have stated”15% Capital subsidy on loan amount or Rs. 15 lacs whichever is minimum.”. I think it is maximum.

    1. Assuming Imported Machinery is for Rs. 50 Lacs. In that case 15% is Rs. 7.50 Lacs or Rs. 15 Lacs. Thus importer will receive Rs. 7.5 Lacs
      Another Example: Machinery is for Rs.150 Lacs. In that case 15% is Rs. 22.50 Lacs or Rs. 15 Lacs. Thus importer will receive Rs. 15 Lacs.

      In both case minimum of both the condition is payable to importer.

  2. I have applied for subsidy and was not availed . When enquires there was a letter from SIDBI stating that they have revived the details 3 days before prior date of closing time

  3. I availed this subsidy of Rs.10.80 lakhs. Cam I again apply for this subsidy for remaing amount Rs.4.20 Lakhs as the max. limit is 15.00 lakhs?

    1. No. Subsidy is 15% on Rs 1 Cr or 15% on Actual value of machine which ever is lower. As per limited info, what i understand is that the value of your machine was less than Rs. 1 Cr and thus subsidy of Rs. 10.80 Lacs was granted to you.

  4. i want to apply purchase new Rotogravure Printing Machine…
    I want to confirm whether subsidy is available for this machine.
    It will cost around 75 lacs

  5. I already availed CLCSS subsidy of Rs.10.80 lakhs in year 2013-14. Now again I am planning to purchase new machineries. So I need information that if again I apply for this subsidy for remaing amount Rs.4.20 Lakhs? Will I get the subsidy?

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