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In the Gujarat Industrial Policy 2020, many new incentives and subsidies have been announced for industries in the Micro, Small and Medium (MSME) segment. Both capital as well as interest subsidies have been announced in order to boost their growth. 

Much like for large investments, talukas (or potential areas of investment) have been categorized into three categories. Capital subsidies to MSMEs will be awarded on the basis of which area the company chooses to invest in. The three categories are as follows along with the subsidy received: 

Capital and Interest Subsidy to Manufacturing MSMEs

Taluka Category/Sector

Capital Subsidy

Interest Subsidy

Category 1 Taluka


At 25% of eligible Term Loan Amount upto INR 35 lakhs;
Additional INR 10 lakhs for investments > 10 Crore

At 7% of term loan amount upto INR 35 lakh p.a. for 7 years

Category 2 Taluka


At 20% of eligible Term Loan Amount upto INR 30 lakhs;
Additional INR 7.5 lakhs for in investment > 10 Crore

At 6% of term loan amount upto INR 30 lakh p.a. for 6 years

Category 3 Taluka


At 10% of eligible Term Loan Amount upto INR 10 lakhs;
Additional INR 5 lakhs for in investment > 10 Crore

At 5% of term loan amount upto INR 25 lakh p.a. for 5 years

Additional Incentives/Benefits

1% additional interest subsidy to SC/ST Entrepreneur/physical challenged entrepreneur/women entrepreneur/Startup in manufacturing sector

1% additional interest subsidy to young entrepreneurs below age of 35 years

In any case, the unit will have to bear minimum 2% interest levied on term loan


Special Benefits for MSMEs in India to make them Globally Competitive

  • Patent Support: 65% of rent upto INR 1 Lakh per annum for 3 years
  • Technology Acquisition: Assistance to MSMEs to attend national and international exhibitions for 60% of stall rent upto a fixed amount
  • Rent Assistance: 65% of rent upto INR 1 Lakh per annum for 3 years
  • ICT Implementation: 65% of cost upto INR 1 Lakh for ERP and 65% of cost upto INR 5 Lakh for ICT implementation
  • Power Connection charges: 35% of charges paid to distribution licences for LT/HT service line, upto INR 5 lakh
  • Quality Certification: 50% of cost upto INR 10 lakh for obtaining certification and 50% of cost upto INR 50, 000 for ZED certification

Other support to MSMEs and Startups in Gujarat

  • Apart from this, the policy also offers conducive assistance to start-ups by increasing the initial seed support from 20 lakhs to 30 lakhs. Additionally, increased sustenance allowance and additional fiscal incentives have also been provided to foster their growth.
  • The government of Gujarat will also for the first time, provide support of upto 65% of the cost of acquiring foreign patented technologies to MSMEs, (maximum support upto INR 50 lakh).
  • Fiscal incentives of 75% of stall rent upto INR 2 lakh for exhibitions in India and of 60% of stall rent upto INR 5 lakh for exhibitions outside India in order to assist in market development of the homegrown MSMEs. 
  • To encourage the usage of renewables and develop a circular economy, the power cycle for calculation of consumption of units has been increased from 15 minutes to 7 AM - 6 PM. This was done with an aim to further ease the process of utilizing rooftop solar power in MSMEs. 
  • Additionally, for purchase of surplus solar power from MSMEs, the price has been increased from INR 1.75/unit to INR 2.25/unit. 

Gujarat’s new industrial policy can be found here:  Gujarat Industrial Policy 2020

For more information on Gujarat’s new industrial policy, please reach out to: 
Drushti Joshi 
Team Gujarat @InvestIndia

Read Part 1: Key features and incentives here
Read Part 2: Capital subsidies to large investments here
Read Part 4: Industrial infrastructure in Gujarat here