Maharashtra announced its first Information Technology Policy in 1998, which was followed by the Information Technology and Information Technology Enabled Services (IT/ITES) Policy-2003 and IT/ITES Policy-2009, to give a boost to the growth of Information Technology sector and thereby generate employment and improve the quality of life. As a result of experiences gained from the implementation of earlier IT/ITES Policies and due to the rampant development in the field of IT/ITES, Maharashtra Government formulated a new policy to boost the industrial sector in the state - the IT/ITES Policy 20151 on August 25, 2015 (IT/ITES Policy 2015).

The IT/ITES Policy 2015 aimed to make Maharashtra the economic magnet of India and the most preferred investment destination of the country. The said IT/ITES Policy 2015 aimed to accelerate investment flow to industrially backward areas of the state, create more and more employment opportunities, and achieve higher level of expert turnover resulting in enhanced productivity and augmentation of Gross State Domestic Product (GSDP).

In this article, we would like to discuss the eligibility criteria for a company's office unit to be classified as an IT/ITES unit, the procedure and the fiscal benefits of obtaining an IT/ITES registration. We also aim at clarifying doubts regarding the meaning of 'Information Technology Enabled Services' and whether a company engaged in manufacturing and other services can be eligible for an IT/ITES registration.

Eligibility Criteria for IT/ITES registration

Before we understand the eligibility criteria, it is important to note that the IT/ITES registration is granted for an office unit of the company and not for the entire company as a whole. For any office unit to obtain the IT/ITES unit, it needs to fulfil two criteria: (i) the business activities of the office unit should fall under the definition of the terms "IT/IT enabled Services" as provided under the IT/ITES Policy 2015; and (ii) 75% of the total turnover of the office unit should be generated from these IT/ IT enabled Services.

Under the IT/ITES Policy 2015, IT industry consists of IT software, IT hardware and IT Enabled services, which are defined under Paragraph 4 of the IT/ITES Policy 2015 as follows:

"(i) IT Software: IT Software is defined as any representation of instruction, data, sound or image, including source code or object code, recorded in machine readable form and capable of being manipulated to providing interactivity to a user with the means of a computer.

(ii) IT Hardware: IT Hardware covers products as notified by Directorate of Industries from time to time. An indicative list is at Schedule A.

(iii) IT enabled Services (ITES): IT enabled services will be as specified by the Central Board of Direct Taxes (CBDT) under Rule 10A of the Income Tax Rules from time to time and are as below:

  • Back-office Operations;
  • Call Centres or Contact Centre Services;
  • Content Development or Animation;
  • Data Processing or data mining;
  • Engineering and Design;
  • Geographic Information System Services;
  • Human Resource Services;
  • Insurance Claim Processing;
  • Legal Databases;
  • Creation and maintenance of Medical Transcription excluding advise;
  • Payroll;
  • Remote Maintenance;
  • Revenue Accounting;
  • Support Centres;
  • Website Services;
  • Translation Services;
  • Data Search integration & analysis;
  • Remote Education excluding education content development;
  • Clinical database Management-Services excluding clinical trials, but does not include any research and development services whether or not in the nature of contract research and development services."

Thus, we can see that the IT/ITES Policy 2015 has provided a broad definition of the term "IT enabled Services". In order to further clarify the meaning of "Back Office Operations", one of the activities falling under the definition of "IT enabled Services", the Government of Maharashtra issued a resolution2 dated 22nd February 2016 (Resolution 2016). The said Resolution 2016 defined "Back Office Operations" to mean the administrative and support staff of a financial institute; or any department or office that is not usually seen by the outsiders, which is responsible for function related to running of the company such as settlements, compliance, accounting, IT and other technology. The Resolution 2016 also recognised that back office functions may be outsourced to external companies and/or in different companies which includes, to name a few: business process outsources services provided mainly with the assistance or use of information; data entry, transcription, reconciliation, consolidation, co-ordination, proportion, processing review of documents; accounting to reporting, reconciliations; financial back office operations; computer/ disaster recovery; IT operations; financial and administrative support. The Government of Maharashtra further clarified in December 2016 that "Back Office Operations" do not include delivery godowns or warehouse of e-commerce companies.3

It is also important to note that the Resolution 2016 also includes back offices of manufacturing and other service, start ups/ companies within the definition of "Back Office Operations". It further qualifies that these back offices should not have direct customer interface but provide essential support through electronic media. Thus, the office unit of a company in engaged in manufacturing or other services may be eligible for ITES registration in case it is carrying out back office operations or other IT enabled services as defined under the IT/ITES Policy 2015.

Procedure for obtaining IT/ITES Registration

The initial ITES registration is called as Letter of Intent (LOI) and the same is issued by the Director of Industries (DOI), Government of Maharashtra for a new office unit. However, before obtaining LOI, the first step is to obtain an Industrial Entrepreneurs Memorandum Part-A (IEM Part-A) for the office unit from the Government of India, Secretariat for Industrial Assistance (SIA), Department of Industrial Policy and Promotion, Ministry of Industry, New Delhi, in case the investment in equipment of the proposed office unit exceeds INR 5 Crore. In case the investment in equipment of the proposed office unit is less than INR 5 Crore, the first step would be to obtain Udyog Aadhaar Memorandum from the Government of India, Ministry of Micro, Small and Medium Enterprises.

Once the IEM Part-A or Udyog Aadhaar Memorandum is received, an application in the prescribed form together with the requisite documents has to be submitted to the concerned DOI who in turn issues the LOI. The LOI issued is valid for a period of 3 years from the date of issuance, during which period the proposed office unit needs to commence the business.

Before expiry of the said period of 3 years, an application has to be made to SIA, New Delhi, for obtaining IEM Part-B. However, IEM Part-B needs to be obtained by only those office units where the investment in equipment of the proposed office unit exceeds INR 5 Crore. Once the IEM Part-B is received, an application together with the prescribed documents has to be made to DOI for obtaining ITES registration. The ITES registration is valid for a period of 3 years and needs to be renewed thereafter.

Fiscal Benefits offered to the IT/ITES units

One of the major benefits to IT/ITES units is that they can take offices premises in an IT Park which has much lower rental charges as compared to other commercial premises. Some of the other fiscal benefits provided under the IT/ITES Policy 2015 include[4]:

  1. 75% stamp duty exemption for taking a premises on leave and license;
  2. Exemption from payment of electricity duty for a certain time period;
  3. Subsidized electricity tariff;
  4. Power tariff subsidy for 3 years @ INR 1 per unit consumed from the date of registration with the DOI after commencement of IT/ITES activity or equal to the investment made in IT Hardware on the date of registration of the unit;
  5. Property tax to be levied at par with residential rates as applicable in the relevant jurisdictions;
  6. Permission would be granted to set-up IT/ITES unit (except for IT hardware and Telecom hardware Manufacturing Units) in any zone (including residential and no-development zones etc.); and
  7. 'Continuous Industry Status' to be granted to IT/ITES unit which means they will be permitted to work 24x7x365 days without any close down except in case of exigencies.


Before an office unit decides to obtain an IT/ITES registration it is important for the office unit to make a list of activities that may fall under the definition of "IT/ITES" under the IT/ITES Policy 2015 and check the percentage of revenue that is generated from those activities. It is also important to keep in mind that even if a Company as a whole may be in manufacturing or other services, its office unit may be eligible for ITES registration in case it fulfils the criteria laid down under the IT/ITES Policy 2015.

Assisted by Ms. Aditi Chandra, a student of Third Year B.B.A., LL.B. (Hons.) studying in Chanakya National Law University (CNLU), Patna.


1 IT/ITES Policy 2015 issued by Government of Maharashtra Industry, Energy and Labour Department vide GR No. ITP-2013/CR-265/Ind-2, dated 25th August 2015.

2 GR No. ITP-2015/Case No. 207/Ind-2, dated 22nd February 2016 issued by Government of Maharashtra Industry, Energy and Labour Department.

3 GR No. ITP-2016/Case No. 200/Ind-2, dated 27th December 2016 issued by Government of Maharashtra Industry, Energy and Labour Department.

4 Paragraph 5 (B), the IT/ITES Policy 2015 issued by Government of Maharashtra Industry, Energy and Labour Department vide GR No. ITP-2013/CR-265/Ind-2, dated 25th August 2015.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.