Assistance of Capital and Interest Subsidy for MSMEs

The scheme for financial assistance of Capital and Credit Linked Interest Subsidy to Micro, Small and Medium Enterprises, is an initiative of the Government of Gujarat. The duration of the scheme would be from 01.01.2015 to 31.12.2019. In this article, let us look in detail about the scheme.

Eligibility Criteria

The eligibility criteria to avail the scheme is given below:

The Enterprise that is registered as an industrial unit under the MSME Development Act, 2000 with the concerned DIC as a manufacturing enterprise.
Those enterprises that have to start production during the operative period.
To carry out expansion or diversification by the existing enterprise with the investment in fixed capital more than 50% of its existing gross fixed capital investment. These investments should be a minimum of 60% in plant and machinery. Such expansion/diversification has to be completed and start its production during the operative period.
To carry out modernization of existing unit with investment in plant machinery and equipment by more than 25% of its existing gross fixed capital investment.
One expansion/diversification and one modernisation during the operative period are eligible to the new unit set up during the operative period of the scheme.
Old and second-hand machinery will not be eligible for assistance.

Available Assistance

Capital Investment subsidy for manufacturing enterprises:

Capital Investment subsidy would be eligible only on Loan Amount disbursed by the Bank/Institution.
In Municipal Corporation areas, a subsidy at 10% of term loan amount would be disbursed by the bank/ Financial Institution with a maximum amount of Rs.15 lakhs.
For outside Municipal Corporation limit, a subsidy at 15% of term loan would be disbursed by the bank/ Financial Institution with a maximum amount of Rs. 25 lakhs.

Interest subsidy for Manufacturing Enterprise:

Enterprises that have obtained the first disbursement during the operative period of the scheme would be eligible for the assistance.
Interest subsidy will be reimbursed after payment to the Bank/Institution.

Area	Rate of Interest subsidy	Maximum limit	No. of Years
Municipal Corporations Limit	5% on the outstanding term loan	Rs. 25 lakhs per annum	Five years
Other areas outside Municipal Corporation Limit	7% on the outstanding term loan	Rs. 30 lakhs per annum	Five years

1% additional interest subsidy will be provided if the enterprise is established with the appropriate equity contribution for the project at 100% by the youth who are less than 35 years as on date of sanction of the term loan.
1% additional interest subsidy would be provided if the enterprise is established with the required equity contribution for the project at 100% by SC/ST/physically challenged and women entrepreneurs.
In every maximum rate of interest, subsidies do not exceed 7% in Municipal Corporation areas and 9% in other areas.

Pre-requisites

Capital Investment Subsidy

Enterprises that obtain the first disbursement during the operative period of the scheme is eligible for the assistance.
If term loans are sanctioned after one year from the date of commencement of commercial production, the enterprise can avail the benefits of the scheme.
The unit continues production at least for 5 years from the date of commencement of commercial production.
The total quantum of Capital Subsidy will not exceed the total loan amount that is disbursed by the bank/Financial Institutes.

Interest Subsidy

An enterprise would have an option for the date to avail the interest subsidy from the date of the first disbursement of the loan or the date of commencement of commercial production. This scheduled date will be final and the period of 5 years will start from that date.
The interest subsidy will be refunded to the enterprise, which pays regular instalments and interest to the Financial Institutions. In case if the enterprise becomes a defaulter of any period, it will not be eligible for a refund of interest subsidy for that particular period.
If the term loan is sanctioned after one year from the date of commencement of commercial production, such enterprises would not be eligible for interest subsidy.
The total quantum of Interest Subsidy (State and Central) would not exceed the total loan amount that is disbursed by the bank/Financial Institutes.

Additional Conditions for Capital Investment/Interest Subsidy

The enterprise has to apply to the respective DIC in the prescribed format with documents as mentioned in the checklist.
The application has to be submitted within one year from the date of the first disbursement of term loan or on the date of commencement of the commercial production.
First commercial sale bill would be considered as the date of commencement of commercial production.
The enterprise has to obtain NOC from the Municipal Corporation if the enterprise is situated in the Municipal Corporation area.
The subsidies would be refunded only after the commencement of commercial production of the enterprise.
For assistance under this resolution, the investment made in Gujarat would be clubbed to decide the status of MSME.
The enterprise has to file information about the annual production, sales, power consumptions and other details that are required by DIC.
The enterprise has to employ at least 85% of the total employment and 60% of supervisory and managerial employment from local individuals.
The enterprise has to abide by the rules laid by the pollution control measures.

The application form for Sanction of Capital Investment Subsidy, Interest Subsidy, Reimbursement of CGTMSE Fees and Assistance in Rent to MSEs under the Industrial Policy is given below. [pdf-embedder url="https://www.indiafilings.com/learn/wp-content/uploads/2019/05/Assistance-of-Capital-and-Interest-Subsidy-for-MSMEs.pdf" title="Assistance of Capital and Interest Subsidy for MSMEs"]

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