 Industrialization plays an important role in the economic growth of a country.

The industrial structure

of a country involves large, medium and small-scale business units. MSME forms an important sector of
the Indian economy.
 MSME plays a key role in the industrialisation of India. They provide immediate large-scale
employment and have a comparatively higher labour-capital ratio.
 Sometimes called a small-scale business, a small-scale enterprise is a business that employs a small
number of workers and does not have a high volume of sales. These small-scale enterprises a generally
privately owned and operated sole proprietorships, corporations or partnerships.
 The concept of MSME varies from one country to another and from one time to another in the same
country depending upon the pattern and stage of development, government policy and administrative
set up of the particular country.
(A) Manufacturing enterprise – Investment in Plant and Machinery
Description In Rupee
Micro Enterprises Upto Rs. 25 Lakhs
Small Enterprises Rs. 25 Lakhs – Rs. 5 Crore
Medium Enterprises Rs. 5 Crores – Rs. 10 Crores

(B) Service Enterprise- Investment in equipment

Description In Rupee
Micro Enterprises Upto Rs. 10 Lakhs
Small Enterprises Rs. 10 Lakhs – Rs. 2 Crores
Medium Enterprises Rs. 2 Crores – Rs. 5 Crores

MSME is contributing much for the economic progress of the country. Hence, Government is offering various
incentives, subsidies and a number of tax benefits for the development of MSME.

ADVANTAGES OF EXEMPTIONS
 They act as a motivational force which makes the small entrepreneur to enter into manufacturing line.
 It encourages the entrepreneurs to start industries in backward, remote and rural areas.
 They help the Government in bringing industrial development uniformly in all regions to remove the
regional disparities.
 They help to develop more new entrepreneurs which lead to entrepreneurial development in the
country.
 They increase the ability of entrepreneurs to face competition successfully to capture the market share.
EXEMPTIONS AVAILABLE TO SSI
1. Export/Import Subsidies- State Governments provide special package of incentives and better
infrastructural facilities for export-oriented units. State Governments reimburse costs incurred by MSMEs
units for shipment of export samples from the nearest port/contains depot to the port of destination.
Special concession of import of raw materials in the case of industrial units set up in backward areas by
graduates/diploma holders in professional subjects or persons belonging to SC/ST has introduced.
2. Interest Free Loans- The government offer interest free loans through its financial institutions in order
to encourage the setting up of units in backward areas. This assists the prospective entrepreneurs to seek
their livelihood and to solve the problem of unemployment.
3. Interest Subsidy- Interest subsidy amounting to the differences between interest rate of 7% p.a. and the
rate of interest charged on the loans advanced by the financial institutions subject to a maximum of Rs.
20,000 p.a. is paid by the Government of India under this scheme. The scheme is limited for a period of 5
years for the engineer entrepreneurs, who set up small industries in any of the selected backward
districts/areas and to a period of 3 years for the units, which are set up in an area other than the backward
ones.
4. Subsidy for Power Generation: State Government Provide rebate in electricity charges to the new and
existing units in their respective states. The facilities are available in Sikkim, Karnataka, Himachal Pradesh,
Gujarat, Rajasthan, Andhra Pradesh, Kerala and Maharashtra.
5. Subsidies to Artisans: In order to encourage the artisans of traditional industries. like handloom and
handicrafts industry, the government is providing number of subsidies which enables to protect the people
who are seeking their livelihood on these traditional occupations.
6. Incentives to Non-Resident Indians: State Government provide special incentives for setting up new
industries by NRIs in their respective states. The facilities are available in Uttar Pradesh, Himachal Pradesh,
Punjab, Rajasthan and Andhra Pradesh.
7. Special Incentives for Women: MSMEs units owned and managed by women entrepreneur having more
than 80 percent women labourers are provided special incentives like 50% subsidy for building and
machinery, rent, subsidy, managerial grants, stipendiary training etc. The facilities are available in Tripura
and Kerala.
8. Tax Holiday- New industrial undertaking including small scale industries, exempted from the payment of
income tax on their profits upto 6% per annum of the capital employed. This concession is for five years
from the commencement of production.
Conditions-
(a) SSI should not have been formed by the splitting or reconstitution of an existing unit
(b) The unit should employ 10 or more workers in a manufacturing process with power or 20 or more
persons without power.

9. Depreciation- A small scale industry is entitled to a deduction on depreciation account on building,

furniture, plant and machinery at the prescribed rates under section 32 of the Income Tax Act. Small
enterprise is allowed subject to a maximum of Rs. 20 lakh deduction for depreciation on plant and
machinery on the diminishing balance method. The deduction of depreciation allowance will not be
allowed if any machinery or plant installed in any office premises to any residential accommodation,
including any accommodation in the nature of a guest house.
Conditions-
1. The assets must be owned by the assessee.
2. The assets must be used for the purpose of the assessee’s business or profession.
3. Depreciations allowance or deduction is allowed only on fixed assets, i.e., building machinery, plant and
furniture.

10. Rehabilitation Allowance- Under Section 33 B, a rehabilitation allowance is given to any small-scale
industrial undertaking in India, whose business is discontinued on account of:
 Flood, typhoon, hurricane, cyclone, earthquake or other natural upheaval
 Riot or civil disturbance
 Accidental fire or explosion
 Action by an enemy or action taken in combating an enemy.
Rehabilitation allowance is used within three years. The re-established, reconstructed or revived unit is
allowed a deduction of a sum equivalent to 60 percent of the amount of the deduction allowance to the
unit.

11. Subsidy on Testing Equipment: Those entrepreneurs who buy testing machinery or equipment to carry
out different tests are subsidised by DICs to the extent of 50 percent of the total cost of testing equipment
subject to a maximum of 10,000. The entrepreneur simply has to fill up the applications form attach the
photocopies of vouchers and produce MSMEs registration certificate.
12. Exemption from Stamp Duty: The procedure of registration of small-scale industries has been made
liberal and greatly simplified. New investor is exempted from stamp duty also. Simple registration forms
have been introduced to facilitate the new entrepreneurs to complete the registration formalities with
much easiness.
13. Concessional Water: The State governments and the local government are providing water to the
small-scale units at a concessional rate to encourage setting up of such units. Water is also made available
continuously to the industrial units to avoid interruptions in production.
14. Composite Loan Scheme: A complete loan upon 50,000 without any margin is given to artisans in
villages and towns, where population is less than 5 lakhs, involving utilisation of locally available raw
material and natural resources.
15. Assistance to Physically Handicapped Persons: State Financial Corporation (SFCs) extend financial
assistance to the extent of 3 lakhs to physically handicapped persons for setting up industrial units as sole-
trader/partnership concern with minimum of 60 percent share. The margin to be provided in such cases is
10 percent on land, building and machinery.