Interest Subsidy under Industrial Policy 2020 to MSMEs in Gujarat
The Industrial Policy 2020 incorporates specific interventions for development of MSMEs. MSME includes all Manufacturing Sectors and Service Sector. All the new enterprise which has filled Udyog Aadhar / Udyam Registration and commences commercial production during the operative period will be eligible for Interest Subsidy. The operative period of the scheme shall be Five year from the date 07/08/2020 to 06/08/2025.
An existing enterprise which has commenced commercial production before the date of announcement of the scheme i.e. 07/08/2020 and increases its investment in gross fixed capital by at least 50% (out of which at least 60% of investment is made in plant and machinery for which expansion is carried out) of its existing gross fixed capital investment on the date of initiating expansion and compared with the date of commencing production during the operative period of the scheme i.e. 07/08/2020 to 06/08/2025.
Out of Forward Integration, Backward Integration, Diversification and Expansion, only one activity will be eligible for subsidy during the policy period. Existing or new enterprise carrying out an activity of Forward Integration, Backward Integration and Diversification with an investment more than 25% (out of which minimum 60% investment should be in Plant & Machinery) of GFCI will be eligible.
The Interest Subsidy is available to both Manufacturing Sector as well as Service Sector which has started its commercial production or rendering services in operative period which is 07/08/2020 to 06/08/2025. The percentage of Interest Subsidy on the basis of Category of Taluka in which enterprise is located with maximum limit of subsidy amount is as under.
|Taluka Category||Interest Subsidy|
|Category 1 Taluka||
@7% on Term Loan with the maximum amount of Rs. 35 lakhs per annum for a period of 7 years.
|Category 2 Taluka||
@6% on Term Loan with the maximum amount of Rs. 30 lakhs per annum for a period of 6 years.
|Category 3 Taluka (including Municipal Corporation areas)||
@5% on Term loan with the maximum amount of Rs. 25 Lakhs per annum for a period of 5 years.
Most Important Points for Manufacturing Sector:
- If Entrepreneur is differently abled or Women entrepreneur and registered startup in manufacturing sector than eligible to 1% Additional interest subsidy on above mentioned percentage.
- If Age of Entrepreneur is below 35 years on the date of sanction of term loan than eligible to 1% Additional interest subsidy on above mentioned percentage.
- Maximum rate of Interest subsidy to an enterprise will not be more than 9%, 8%, 7% where the rate of interest subsidy is 7%,6% & 5% respectively. However, eligible enterprise shall have to bear minimum 2% interest levied on term loan by Bank/ Financial institution.
- An Existing enterprise which installs solar power plant or any other renewable power plant for captive consumption in the premises will be eligible for interest subsidy in accordance to the location of the Enterprise. In addition to the Interest Subsidy as mentioned above special provision is made for the interest subvention on such installation. However, incentive will be available only once.
Most Important Points for Service Sector:
- Service Enterprise which has service tax registration is only eligible for incentive. The Enterprise must have GST registration.
- If unit is registered start up in service sector and having Udyam registration as MSME than eligible to 1% Additional interest subsidy on above mentioned percentage.
- The enterprise shall have to obtain shop and establishment registration from Municipal Corporation for doing business, if enterprise is located in the area of Municipal Corporation.
- The enterprise shall have to give permanent employment to minimum 10 (ten) persons.
- The enterprise will not be eligible for interest subsidy under this scheme if, term loan is sanctioned after one year from the date of commencement of commercial production/ rendering services.
- Only New MSME of Service Sector as Listed in Bellow will be eligible for Interest Subsidy on the term loan on new machinery, equipment and furniture/ fixture except land and building.
- Logistics facilities such as Container Freight Station Operators/Warehouses/Cold Storages etc.
- Material Testing Centre
- Start ups and Incubation Centre
- Hallmark certification Centre
- Technical testing and analysis servicing
- Maintenance and repair of machineries and equipments
- Repair of Computer / Communication and Electronics equipments / Household Goods
- Maintenance and repair of Utility Projects
- Packaging services
- Industrial reuse / disposal services
- Apparel/Cutting & Stitching job work (other than retail tailoring)
- Printing, Scanning, Digitalization & Lamination
- Weigh bridges
- Color labs
- Steam & Air conditioning supply
- Waste collection, treatment and disposal activities
- Electrical, plumbing and other installation activities
- Maintenance and repair of Motor vehicles
- Motion pictures, Video and Television production, Sound Recording and Music publishing activities
- Activities of internet Access by the Operator of the wireless / Satellite infrastructure
- Web hosting activities
- Specialize design activities – Fashion design related to Textile / Apparel / Jewellery/ Furniture/ Fashion goods/ Graphic design etc.
- State Level Empowered Committee is empowered to add / delete service activities listed in this Annexure.
- Financial Services
- Health Services
- Transport and logistics Services
- Audio Visual Services
- Construction related Engineering Services
- Environmental Services
Frequently asked Questions:
Q1. What is time limit to apply Interest Subsidy?
Ans. Enterprise shall have to apply at online portal within one year from the date of first disbursement of loan, or on or before the date of commencement of commercial production or rendering services whichever is later. Late Submission of application will be considered by deducting late period after maximum permissible time for application. The period of late submission will be counted from the accepted date of option (i.e. date of first disbursement of loan or from the date of commencement of commercial production/ rendering services).
Q2. When Interest Subsidy can be paid?
Ans. It will be paid only after commencement of commercial production / rendering services of the enterprise.
Q3. Is Interest Subsidy available on Term Loan taken from all Banks?
Ans. Interest Subsidy is available only on term loan sanctioned by the financial institution/ Bank but term loan sanctioned by Non – Banking Financial Institutes (NBFC) will not be eligible for incentives / Capital Investment Subsidy.
Q4. Can we apply for Interest Subsidy from both State and Central Governments?
Ans. Yes, enterprise can apply but, if enterprise is availing interest subsidy under scheme of Central government then total quantum of Interest subsidy from State and Central, in any case shall not exceed the total interest paid to Bank / Financial institution.
Q5. Interest Subsidy is available on term loan taken for which kind of assets?
Ans. Term loan taken for acquisition of new plant and machinery, equipments and furniture & fixtures is eligible for Interest Subsidy. Term Loan taken for purchase of land and Building is not eligible for Interest Subsidy.
Q6. Any regular return to be file to concerned departments after taking subsidy?
Ans. Yes, Enterprise shall have to furnish information regarding production, sales, turnover, and employment etc. annually to concerned DIC before end of September each year.
Q7. What are employment criteria?
Ans. Enterprise will have to employ at least 85% of the total employment and 60% of supervisory and managerial staff from local persons. The enterprise shall have to give permanent employment to minimum 10 (ten) persons in case of service sector.
Q8. What happen for early closer of unit’s activity?
Ans. Enterprise will have to remain in production for 7 years from the date of commercial production and if it fails to continue production for 7 years, the amount of capital investment subsidy disbursed will be recovered as arrears of land revenue.
Q9. What if unit is located on more than one Talukas?
Ans. If an enterprise is located in the geographical limit of more than one taluka, then the taluka in which the enterprise has the largest percentage of land area will be considered as the eligible category.
Q10. What is Gross Fixed Capital Investment (GFCI)?
Ans. Gross Fixed Capital Investment means the investment made in Building, plant and machinery, utilities, tools and equipment, and other assets (excluding land) required manufacturing the end product.
Q11. What is maximum rate of interest subsidy?
Ans. Maximum rate of Interest subsidy to an enterprise will not be more than 9%, 8%, 7% where the rate of interest subsidy is 7%,6% & 5% respectively. However, eligible enterprise shall have to bear minimum 2% interest levied on term loan by Bank/ Financial institution.
Q12. What happens if enterprise defaults in repayment of loan?
Ans. If the enterprise becomes defaulter in payment of inters or installment of term loan to Bank/Financial institution as per guidelines of RBI and as mentioned in certificate of Bank / Financial institution such default period will be deducted. Interest subsidy will not be available for penal interest or any other bank charges.