Government enhances regulations on white goods

The Government has released a new method of estimating production for captive use, and sales to group firms and associated parties, thereby enforcing greater control over the selected applicants under the Production Linked Incentive for white goods.

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The Government has come up with a new method of estimating production for captive use, and sales to group firms and associated parties. The same will enforce greater control over the selected applicants under the Production Linked Incentive for white goods.

The amended rules include a new formula for calculating related-party sales value as well as a provision for the Project Management Agency to verify incentive claims. IFCI is the PLI implementing agency for white goods. The agency has also been given the task of recommending the quantum of incentives to manufacturers. 

Furthermore, changes in the rules give the Department for Promotion of Industry and Internal Trade (DPIIT), the administrative ministry for white goods, the authority to visit the manufacturing sites of the beneficiaries. Previously, the management agencies had access to this power.

For determining the value of sales to related parties the new guidelines allow the use of ‘cost plus criteria’ for determining arm’s length price provided it is certified by a Cost Accountant. In the use of cost-plus criteria, the new rules allow for adding a 5% margin for calculating per unit output. Sale to unrelated parties continues to be the other commonly recognized definition of the arm’s length concept.

The criteria for calculating and claiming the incentives by the qualified enterprises under the PLI, currently running for 14 industries, is the value of additional output using new investments. The amount of incentive varies from 4-6% on white goods that include Air Conditioners and their parts and LEDs.

Under the new guidelines, if in case the companies get paid incentives on the basis of claims which do not correspond with the statutory compliances then the extra money will have to be returned with incentives. However, as a relief to companies, the date for filing for claims for a financial year has been moved from October 31 to January 15 of the following year.