To promote the growth of BPO (as defined below), the central government introduced the India BPO Promotion Scheme (“Scheme”), as envisaged under the Digital India Programme, which sought to incentivize the establishment of seats with respect to BPO or IT Enabled Services (“ITeS”) across the country. However, as per Clause 3 of the Scheme, the scheme was applicable to only those entities who had applied for incentives under the Scheme up to 31.03.2019.[i]
Furthermore, the Scheme excluded certain states as these states had been conducting significant levels of IT–BPO activities hence, states such as Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, Delhi- NCR, and Pune were exempted from the Scheme.[ii]
In light of the foregoing and the non-applicability of the Scheme in the present scenario, this note shall discuss and explore the compliances and approvals required under the Odisha BPO Policy from the perspective of a BPO/ITeS unit.
The concept of Business Process Outsourcing (“BPO”) has been detailed under the Odisha BPO Policy, 2021 (“Policy”) to mean such outsourcing that involves contracting the operations and responsibilities for a particular business process to a third-party service provider. Companies outsourcing a business process then pay BPO companies fees for the delivery, technology and management. In short, it means the transfer of an organization’s business process/function to an external agency who uses an IT-based service delivery for following activities: (a) call centres; (b) medical transcriptions; (c) back office operation; (d) knowledge process outsourcing (“KPO”); (e) insurance claim processing; (f) financial and accounting processing; (g) hr & payroll; (h) IT enabled banking, non-banking services including insurance, pension, asset management and market related services; (i) depository and security registration and dematerialization services; (j) any other services as defined by Government of India or Government of Odisha from time to time. [iii]
Applicability: The Policy is applicable to BPO/ITeS/KPO units (“BPO Unit”) for all the activities listed in the aforementioned definition of a BPO.[vi]
Eligibility:[vii] In accordance with Clause 5 of the Guidelines read with the Policy, the following are eligible to claim benefits under the Policy:
a. New units: A unit that commences commercial production/service during the operative period of Policy with due acknowledgement of competent authority is eligible for incentives, subject to the general conditions and specific conditions as stipulated in the Policy;
b. Existing units: Units that commenced commercial production before the operative period of Policy taking up expansion/modernization /diversification are eligible for specific incentives, provided there is an increase in capacity by a minimum of 50% of the original approved capacity;
c. Units undertaking activities under Clause 9.1 of the Policy in Odisha;
d. All required documents to operate the unit shall be valid on the date of application for availing of this incentive.
Incentives available under the Policy:[viii]
The Policy provides various subsidies to the BPO Units, however, such subsidies are subject to the maintenance of appropriate documentation and satisfaction of conditions as mentioned under each subsidy.
1. Capital Investment Subsidy:[ix]
Capital investment herein refers to buildings and infrastructure, computers, networking, and related hardware and software.
Expansion units are allowed to avail one-time capital investment subsidy subject to the purchase of computer hardware, software tools, and networking equipment.
Further, the investment subsidy will be in the form of reimbursement to eligible BPO/KPO/ITeS units i.e., total investment has to be made by the company post which the applicable subsidy will be reimbursed to the eligible and approved applicants. The entity for which the company is seeking capital investment subsidy reimbursement shall have direct relevance to the operational process.
Below are the documents required to avail capital investment subsidy:
- Duly filled application form in a format as under Annexure — IV, IV-A, IV-B of the Policy;
- Copy of the Detailed Project Report (“DPR”) signed by the promoter;
- Copies of all invoices/receipts relevant to the capital investments in the list of admissible items mentioned under Appendix-A of the Policy;
- Term loan sanction letter from banks / financial institutions;
- Bank statement on release of term loan;
- Proof of payment (Net banking / NEFT / RTGS / DD Cheque) highlighting all incurred expenses towards building, plant, and machinery
2. Reimbursement of State Goods and Service Tax:[x]
Input tax credit in relation to any tax period means the setting off of the amount of Input Tax or part thereof under section 41 of the Odisha Goods and Service Tax Act, 2017 (“OGST Act”) by a registered person.
Output tax in relation to any tax period means the tax leviable and payable under section 43 of the OGST Act, 2017 in respect of the sale of any taxable finished goods or services or both made by a registered person in the course of his business but excludes tax payable by him on reverse charge basis.
Checklist of documents to avail State Goods and Service Tax reimbursement:
- Duly filled prescribed application form in a format as prescribed under Annexure-V;
- Copy of Goods and Service Tax (“GST”) registration certificate;
- Copies of the GST return (GSTR-3B, GSTR-4, as the case may be) for the reimbursement claim period;
- Copies of the GSTR payment receipts/payment challan (Net Banking/NEFT/RTGS/ DD/ Cheque No. / Over the Counter cash);
- Chartered Accountants (“CA”) certified copy of the total amount incurred against Fixed Capital Investment (“FCI”) along with the break-up of various components;
- Proof of Fixed Capital Investment (purchase order copy, invoice, delivery receipt, etc.).
3. Reimbursement of interest:[xi]
Interest refers to the term loan interest availed by the company to purchase fixed assets like computer hardware, software tools, electrical and networking equipment, furniture and fixtures, other fixed assets, and buildings.
The interest subsidy will be given in the form of reimbursement of the interest paid on the term loan availed by the company from public financial institutions or banks, as the case may be. In case the rate of interest is less than five percent, then reimbursement will be limited to the actual rate of interest and not five percent. This reimbursement to the unit shall not include penal interest, liquidated damages etc. paid to the financial institutions/ banks.
The application for interest subsidy reimbursement can be made only after the commencement of commercial operation and reimbursement can be availed for the remainder of the duration of the loan but only up to a maximum period of the first five (05) years or up to the operative period of the policy.
Checklist of documents to avail interest subsidy:
- Duly filled prescribed application form in a format as prescribed under Annexure VI;
- Bank / financial institution term loan sanction letter;
- Certified loan account statement from the bank with details of installment (and interest paid) on a monthly basis for each financial year (separate certificate for each term loan);
- Bank certificate regarding the disbursement of the term loan to the until till date (separate certificate for each term loan);
- Bank certificate for payment of regular interest by the unit since the disbursement of the term loan (separate certificate for each term loan);
- Copy of DPR signed by the promoter;
- Proof of payment (Net Banking / NEFT / RTGS / DD/Cheque) highlighting all payments made towards repayment of the loan;
- CA certified copy of the total amount incurred against fixed capital investment along with the break-up of various components;
4. Power incentives:[xii]
The power tariff reimbursement subsidy shall be applicable only to the BPO Units that are utilizing power from the government, or power distribution companies, or rural electrical companies, provided the power connection is in the name of the enterprise claiming such power tariff reimbursement.
In a situation where the industry/enterprise (“Buyer”) purchases an existing building with land, through either lease or outright sale, from another industry/enterprise (“Seller”), equipped with prior power connectivity, such purchased unit will not be entitled to any power tariff subsidy reimbursement if: (i) the power connection is in the name of the Seller; (ii) the Seller has already availed power incentive(s). However, if the Seller transfers the power connection in the name of the Buyer, the Buyer can avail the power tariff reimbursement provided the Buyer installs a new plant and machinery.
Checklist of documents to avail power incentives reimbursement:
- Duly filled prescribed application form in a format as prescribed under Annexure VII-A for electricity bill Reimbursement;
- Application form for reimbursement of energy audit fee in a format as prescribed under Annexure VII-B;
- Copy of the power sanction letter;
- Copies of the electricity bills for the period for which reimbursement is being claimed;
- Copies of the energy audit certificate (as under applicable laws);
- Copies of the energy audit certification fee receipt (as under applicable laws);
- Documents related to details of Accreditation of Energy Audit Agency (if applying for Energy Audit Fee Reimbursement);
- Proof of payment (Net Banking/NEFT/RTGS/DD /Cheque) highlighting all incurred expenses.
5. Human Capital Investment Subsidy:[xiii]
The employees of a unit shall not be associated in any form, either directly or indirectly, with any other unit/industry/service against whom the incentives are being claimed.
The unit must provide proof that the new positions for which recruitment assistance is being availed are in addition to the pre-existing positions, further, the unit shall also provide details of the employees hired for those new positions.
Additionally, positions for which assistance has been previously availed will not be eligible for reimbursement even if there is a new recruit for that particular position. However, it is to be noted that this incentive is only applicable for an Odisha domiciled employees, who is on the direct payroll of the company.
All BPO/KPO/ITeS unit employees should undergo three (03) months of training. Such units can claim incentives once a year and the authorities will offer recruitment assistance for three (03) years.
Checklist of documents to avail human capital investment subsidy:
- Duly filled Prescribed Application Form in a format as prescribed under Annexure VIII;
- Proof of domicile from the competent authority for each eligible employee;
- Labor officer/commissioner verification report;
- Employment exchange number of the employee, if registered;
- Copy of scheduled caste/scheduled tribe/disability certificates of employees;
- Employee Provident Fund (“EPF”)/Employee State Insurance (“ESI”) return sheet for all employees.
6. Reimbursement of ESI/EPF:[xiv]
The reimbursement will only be provided for Odisha-domiciled employees of the unit. The assistance will be in the form of reimbursement for a maximum period of three (03) years only.
Checklist of Documents to avail reimbursement for EPF and ESI:
- Duly filled prescribed application form in a format as prescribed under Annexure IX;
- Certificate from a human resource certifying details such as employee identification, date of joining, designation, provident fund account no., EPF/ESI contribution, etc.);
- Copy of return filed with EPF Organization / ESIC in respect of employees directly employed by the company;
- Copies of challan & receipt for EPF and/or ESI contribution amount claimed;
- Proof of Odisha domicile of employees for whom employer’s contribution has been made in the period of application;
- Details of employer’s registration number with ESI/EPF authority.
7. Internet Connectivity Incentive:[xv]
The unit can avail the aforementioned incentive for five (05) years from the date of commencement of their operations. The internet charge can be reimbursed only if the billing period falls within the Policy period. The reimbursement will be made against actual bills and payment receipts submitted by the unit. Further, the assistance will be in the form of a reimbursement.
Checklist of documents to avail internet connectivity incentive:
- Duly filled prescribed application form in a format as prescribed under Annexure X;
- Bill of internet bandwidth/leased line service provider;
- Receipts of payments of internet bandwidth/leased line bill.
8. Subsidy for rent paid for Built-up space:[xvi]
The built-up space rental subsidy will be in the form of reimbursement, i.e., the actual rent has to be paid by the applicant for the unit post which the applicable subsidy will be reimbursed to the applicant.
Further, the reimbursement under this subsidy will be made on a quarterly basis to the eligible and approved applicants on receiving self-certified copies of payment receipts for the applicable months.
This subsidy is available for five (05) years and it shall commence from the quarter of the first disbursement till the end of the twentieth quarter, without extensions.
The primary benefit of this subsidy is that any increase or decrease in the rental space by the unit will be taken into consideration when providing a revised reimbursement.
This subsidy will be applicable for rental space situated in all government-owned facilities and designated information technology parks, incubation centres, and private space approved by the respective department.
Checklist of documents to avail reimbursement on rental expenses:
- Duly filled prescribed application form in a format as prescribed under Annexure XI;
- Certificate from competent authority certifying the operational existence of the firm in a government-owned facility or its existence as a BPO Unit;
- Agreement for occupancy of space with details of total space leased. The agreement should be valid for the time period the subsidy is being claimed by the applicant;
- Copies of invoices/receipts of payment made towards the rental for the period the reimbursement is being claimed;
- Proof of payment (Net Banking/NEFT/RTGS/DD) highlighting all incurred expenses towards rent of built-up space.
9. BPO Parks:[xvii]
The incentives can be availed by a park developer only after the park has been notified as a BPO Park by the Electronic & Information Technology Department, Government of Odisha.
Checklist to avail incentives:
- Duly filled prescribed application form in a format as prescribed under Annexure-XII;
- Documents supporting to reimbursement of capital investment;
- Documents supporting to reimbursement of conversion fee (in a format as under Annexure XV);
- Documents supporting to reimbursement of state goods and service tax;
- Copies of all invoices/receipts relevant to the capital investments;
- Proof of payment (Net Banking / NEFT / RTGS / DD / Cheque) highlighting all expenses incurred.
10. Marketing Support:[xviii]
Marketing costs incurred by the applicant can include costs incurred towards registrations for domestic, international events and other transportation expenses.
Checklist of documents to avail reimbursement for marketing expenses incurred by a unit:
- Duly filled prescribed application form in a format as prescribed under Annexure XIII-A;
- Proof of participation in the event (fee invoice related to event participation);
- Proof of travel and accommodation of participants at the event (air tickets, boarding pass, visa stamping, copies of supporting invoices/bills for expenses incurred for the same);
- Copy of employee identification card as proof of employees who participated in such event;
- Event participation report.
11. Quality and product certification expenses:[xix]
For the purposes of this Policy, quality and product certification expenses include, without limitation, the fees charged by the certification agency, the cost of testing equipment as per national or international quality standards, and other certification requirements pertaining to the BPO Unit.
Checklist of documents to avail quality certification reimbursement
- Duly filled prescribed application form in a format as prescribed under Annexure X-IV;
- Copy of the granted quality certificates/renewal certificates (as applicable and containing details such as certification number, period of validity, and date of issuance/renewal);
- Copies of all applicable expense invoices and receipts;
- Proof of payment (Net Banking/NEFT/RTGS/DD/Cheque) highlighting all incurred expenses towards each quality certification /renewal.
Application Procedure & Evaluation:[xx]
In addition to the subsidies available, for a BPO Unit to avail the subsidy, the BPO Unit shall adhere to the below mentioned procedure:
- Units satisfying the eligibility criteria shall submit the documents mentioned in the respective aforementioned checklist in Annexure-I to avail reimbursement;
- Copies of the documents submitted should be self-certified by the proprietor / managing partner / managing director / authorized signatory;
- On receipt of the application at OCAC[xxi], the acknowledgement as prescribed in a format as under Annexure III shall be dispatched to the applicant/unit duly signed by the authorized officer, on the day of the receipt of the application at OCAC;
- OCAC will check the eligibility and determine the applicability in each case within a maximum period of twenty -eight (28) working days;
- All the documents submitted by the units shall be physically verified against the original by OCAC.
Competent Authority for Application
A committee under the chairmanship of the Principal Secretary, the Electronics & Information Technology Department will be constituted to examine all the incentive/subsidy claims for approval/sanction/rejection(“Competent Authority”). The Competent Authority will have members from other relevant stakeholder departments and organizations.
The Competent Authority ventures into the merits of each application to decide whether the applicant qualifies for a grant of the incentive/subsidy, and also determines the quantum of incentive/subsidy admissible.
Minimum years of operation:
The BPO unit must commit and provide a guarantee to operate for a minimum period of three (03) years from the commencement of operations to avail of all incentives under the Policy.[xxii]
Duration of the Policy:
The Policy will be in operation for five (05) years from the date notified in the gazette by the Government of Odisha or till substituted by another policy.[xxiii]
Cases where BPO cannot avail subsidies or exemptions:
The following are not permitted to claim the subsidies/benefits under the Policy:
- The BPO units availing subsidies and benefits under the Policy cannot claim exemptions from any other policy of the Government of Odisha[xxiv];
- Entities that are availing benefits from the Government of India under the Scheme are not eligible to avail the incentives under the Policy;
- BPO units, seeking to avail financial support under the Policy, shall be under an obligation not to claim similar financial support under any other scheme of State Government concerned. However, incentives not claimed under this Policy may be availed from other Schemes of Central/State Government for new activity, expansion/ modernization/ diversification as the case may be, of their existing operation upon notification of the Policy.[xxv]
Exemptions under the Policy from compliance with laws:
The BPO units are exempted from the purview of Sections 9,10,11 and 23 of the Odisha Shops & Commercial Establishment Act, 1956 (“Odisha S & E”).[xxvi]
Section 9 of the Odisha S & E mentions the concept of ‘Interval for rest’, which is the period of work of an employee in an establishment each day.
Section 10 of the Odisha S & E provides for ‘Spread-over’ according to which the spread-over of an employee in an establishment inclusive of the interval for rest will not exceed twelve hours in any day.
Section 11 of the Odisha S & E mentions the ‘Opening and closing hours’ of an establishment.
Section 23 of the Odisha S & E prohibits ‘employment of women or children during the night’.
In furtherance to the obligation to not comply with the aforementioned provisions, the Policy mandates the BPO Units to apply for general permission for three shift operations including women who may work during night hours provided the BPO Unit self-certifies and has reasonable safety measures in place to ensure safety and security of women opting for the night shift.[xxvii]
There are few exemptions available to a BPO Unit under the Policy that have not been discussed under this note. The contents of this note deal with the approvals and compliances from the perspective of a BPO Unit intending to set up their unit in Odisha.
[i] Clause 3, India BPO Promotion Scheme.
[ii] Annexure 1, India BPO Promotion Scheme.
[iii] Clause 9.1 of the Policy.
[vi] Clause 5.1 of the Policy.
[vii] Clause 5 of the Guidelines read with the Policy.
[viii] Clause 3 of the Policy.
[ix] Clause 3(i) of the Policy read with Clause 6.1 of the Guidelines.
[x] Clause 3(ii) of the Policy read with Clause 6.2 of the Guidelines.
[xi] Clause 3(iii) of the Policy read with Clause 6.3 of the Guidelines.
[xii] Clause 3(iv) of the Policy read with Clause 6.4 of the Guidelines.
[xiii] Clause 3(v) of the Policy read with Clause 6.5 of the Guidelines.
[xiv] Clause 3(vi) of the Policy read with Clause 6.6 of the Guidelines.
[xv] Clause 3(vii) of the Policy read with Clause 6.7 of the Guidelines.
[xvi] Clause 3(viii) of the Policy read with Clause 6.8 of the Guidelines.
[xvii] Clause 3(ix) of the Policy read with Clause 6.9 of the Guidelines.
[xviii] Clause 3(x) of the Policy read with Clause 6.10 of the Guidelines.
[xix] Clause 3(xi) of the Policy read with Clause 6.11 of the Guidelines.
[xx] Clause 7 of the Guidelines.
[xxi] Odisha Computer Applications Centre (OCAC) is the Nodal Agency for implementation of the Odisha Electronics Policy. The Odisha Computer Applications Centre (OCAC) is responsible for monitoring the progress of various activities under this Policy.
[xxii] Clause 5.6 of the Policy.
[xxiii] Clause 5.8 of the Policy.
[xxiv] Clause 5.3 of the Policy.
[xxv] Clause 5.7 of the Policy.
[xxvi] Clause 6(i) of the Policy.
[xxvii] Clause 6(ii) of the Policy.
Author: Shubham Tibrewala, Associate (assisted by Shishank Shaw)
Disclaimer: The content of this article is intended to provide a general guide to the subject matter and that the same shall not be treated as legal advice. For any queries, the author can be reached at email@example.com