In 2019, MSME Schemes by the Government made waves of difference and brought financial stability to the sector.
One of these is the Interest Subvention Scheme, and the Government has made further amendments to it, to help provide better access to credit for the MSME sector.
In the 2019 budget, the Government declared that GST registered MSMEs get 2% interest subvention from Government for incremental loans of Rs 1 crore under the MSME Credit scheme.
In a positive move, the Government on Tuesday approved changes to operational guidelines of the Interest subvention scheme for the MSME sector.
How Interest Subvention MSME scheme works:
In February, The Prime Minister announced a 2% interest subvention for all GST registered MSMEs on fresh or incremental loans.
The Scheme aims to encourage both manufacturing and service enterprises to increase productivity. The scheme also wants to provide incentives to MSMEs for onboarding on GST platform. This, in turn, helps MSMEs register their businesses and fall under the economy’s radar.
This MSME Scheme is open for a period of two financial years (FY-2019 and FY-2020)
How it works:
- The interest relief is calculated at 2% p.a. on the outstanding balance from the date of disbursal or the date of notification of this scheme.
- The loan accounts on the date of filing claim should not be declared as NPA as per extant guidelines in force.
- No interest subvention shall be admissible for any period during which the account remains NPA.
New changes and updates to the MSME scheme:
Some of the major changes include:
- No Udyog AadhaarNumber (UAN) filing/registration is needed for units eligible for GST. When the scheme was revamped in February this year, UAN and GSTN numbers were both mandatory for availing the scheme.
- If your business does not fall under GST registration – then you can:
- Submit income tax Permanent Account Number (PAN)
- Submit loan account so that concerned eligible institutions recognise your business as MSME.
Is your business eligible for the scheme?
Check the below requirements to be eligible for the scheme:
MSME exporters who avail interest subvention for pre-shipment or post-shipment credit under the Department of Commerce are not eligible for assistance.
For better outreach, all working capital or term loan is eligible for coverage to the extent of Rs100 lakh only during the availability of the MSME scheme.
Interest subvention is available for maximum financial assistance of Rs 100 lakh. This is in situations where MSMEs obtain working capital and term loan by a financial institution.