Scheme for Assistance to Micro, Small and Medium Enterprises: Assistance for Interest Subsidy for Service Sector

Scheme for Assistance to Micro, Small and Medium Enterprises (MSME): Assistance for Interest Subsidy (Service Sector) is a Gujarat state scheme run by the Industries and Mines Department. It gives interest subsidy on term loans taken by new service sector MSMEs for new machinery, equipment and fixtures, excluding land and buildings. This support helps reduce the interest burden on new businesses and encourages the growth of the service sector across Gujarat.

The scheme was operative from August 7, 2020 to August 6, 2025. That period has now ended. In June 2026, Gujarat launched the Viksit Gujarat Industrial Policy 2026, which continues MSME support in a new form. Under the new policy, service sector MSMEs can still get interest subsidy along with capital subsidy and power tariff reimbursement through a "Choose Your Incentive" model. This article explains the interest subsidy support for service sector MSMEs in Gujarat and how the new 2026 policy carries it forward.

Scheme for Assistance to Micro, Small and Medium Enterprises: Interest Subsidy for Service Sector

Gujarat has one of the largest MSME bases in the country, with over 42 lakh MSME units. The interest subsidy scheme is part of the state's effort to make it easier for new service businesses to start and grow. By reducing the interest cost on term loans, the scheme lowers the financial load on new enterprises during their early years.

Under the old policy, the subsidy rate depended on the category of the taluka where the business was located. Category I talukas got 8% on the term loan up to ₹35 lakh per year for 7 years. Category II talukas got 7% up to ₹30 lakh per year for 6 years. Category III and municipal corporation areas got 6% up to ₹25 lakh per year for 5 years.

Registered startups in the service sector with a valid Udyam or MSME registration could get an additional 1% interest subsidy on top of the standard rate. This bonus was available only once during the operative period of the scheme.

Key Information

Viksit Gujarat Industrial Policy 2026

Gujarat announced the Viksit Gujarat Industrial Policy 2026 on June 15, 2026, at Mahatma Mandir in Gandhinagar. The policy is valid for five years, from June 2026 to May 2031, and replaces the earlier 2020 policy. It places MSMEs, startups, women entrepreneurs and the youth at the centre of the state's development agenda.

Under this new policy, MSMEs can avail 35% to 45% of their investment as incentives based on the taluka category. The incentives are given through a "Choose Your Incentive" model, where a business can pick a combination of capital subsidy, interest subsidy or power tariff reimbursement that suits its needs. This gives service sector MSMEs more flexibility in how they claim their benefit.

Special thrust sectors such as toys, footwear, robots and drones can get a higher incentive of 45% to 50% of investment based on the taluka category. The new policy also supports quality certification, ZED certification, technology acquisition, patent registration and market development assistance for MSMEs.

Benefits

Under the earlier interest subsidy scheme, the support depended on the category of the taluka where the business was set up. The subsidy was paid on the term loan taken for new machinery, equipment and fixtures.

Bonus Benefit: A registered startup in the service sector with a valid Udyam or MSME registration qualifies for an additional 1% interest subsidy on top of the standard rate.

Eligibility

To get the benefit, the business had to meet the following conditions:

1. It should be a new Micro, Small or Medium enterprise.
2. It must operate in the service sector as defined in the government approved annexures.
3. The term loan must come from a recognized bank or financial institution.
4. The application should be submitted within one year of loan disbursement or before commercial production starts, whichever is earlier.
5. The enterprise should remain operational for at least 7 years after the subsidy is approved.
6. It must follow all required pollution control regulations.
7. Each project is eligible for only one type of investment subsidy, such as expansion or diversification.

Exclusions

Loans sanctioned by Non-Banking Financial Companies (NBFCs) do not qualify for incentives under this resolution. The subsidy covers only the standard interest on the term loan and does not include penalties or other bank charges.

Application Process

Applications for the scheme are submitted online through the Investor Facilitation Portal (IFP) of Gujarat. Follow these steps to complete the process.

STEP 1 - Visit the Investor Facilitation Portal (IFP) and click on "New Investor Registration" to open the registration form.

STEP 2 - Fill in the business details in the registration form and click on "Submit".

STEP 3 - Verify the email address using the link sent to the registered email ID.

STEP 4 - After verification, the registration account is ready. Log in to the portal using the email and password.

STEP 5 - Fill in the required business details and upload the mandatory documents to complete the application. Support is available through the official helpdesk contact page.

Documents

Keep the following documents ready while applying. The list covers the main items asked under the scheme.

1. Signed application form with the official seal of the enterprise.
2. Copy of the Udyog Aadhaar or Udyam Registration.
3. Bank sanctioned term loan letter.
4. Bank statement or certificate confirming the first loan disbursement.
5. Business constitution documents such as a partnership deed.
6. Detailed Project Report (DPR).
7. Shop and Establishment Certificate if located in a municipal area.
8. GST registration certificate, if applicable.
9. PAN card of the enterprise.
10. ITR from the last financial year.
11. Proof of age for entrepreneurs under 35 years.
12. Caste or disability certificates, if applicable.
13. Consent to Establish (CTE) from GPCB, if applicable.
14. Property evidence such as 7/12 Utara or valid NA permission.
15. Notarized rent or lease agreements if the property is not owned.
16. Property tax receipts.
17. Board resolution authorizing the signatory.

References

For further details, refer to these official resources:

• Guidelines of the scheme
• Online Application Portal
• MSME Incentive Schemes, Gujarat
• Gujarat Industrial Policy 2026 announcement

FAQ's

What is Scheme for Assistance to Micro, Small and Medium Enterprises (MSME): Assistance for Interest Subsidy (Service Sector)?

This is a Gujarat state scheme from the Industries and Mines Department that gives interest subsidy on term loans for new service sector MSMEs, covering new machinery, equipment and fixtures.

What was the duration of the scheme?

The scheme was operative from August 7, 2020 to August 6, 2025. That period has now ended.

What happens after the old scheme period ended?

Gujarat launched the Viksit Gujarat Industrial Policy 2026 in June 2026, which continues MSME support through a "Choose Your Incentive" model covering capital subsidy, interest subsidy and power tariff reimbursement.

What is the maximum subsidy amount available?

Under the earlier scheme, the benefit went up to ₹35,00,000 per annum for up to 7 years, depending on the taluka category. Under the new policy, MSMEs can avail 35% to 45% of investment based on taluka category.

Who is eligible to apply?

New MSMEs in the service sector as listed in the official annexures were eligible. Existing MSMEs could apply if they met the expansion criteria of investing at least 25% extra, with 60% going toward plant and machinery.

Do loans from NBFCs qualify?

No, loans from Non-Banking Financial Companies do not qualify. The term loan should come from a recognized bank or financial institution.

Are there extra benefits for startups?

Yes, registered startups with valid Udyam registration get an additional 1% interest subsidy on top of the standard rate.

Is GST registration required?

Yes, GST registration is a mandatory requirement to participate in the scheme.

What happens if the business closes early?

If the enterprise stops operations before 7 years, the disbursed subsidy is recovered as arrears of land revenue.

Where can one apply?

Applications are submitted online through the Investor Facilitation Portal at ifp.gujarat.gov.in.