All businesses strive to make hard-earned money yield the maximum returns. Whether it’s managing debt or making astute financial decisions, we constantly seek avenues that offer us a financial edge. One of the common ways of funding a business is debt. While debt entails a fixed repayment, it is often considered to be ‘cheaper’ than parting away with one’s capital, which can become very valuable as the company grows.
Hence, businesses often rely on debt to fund their expansion plans. Since debt is such an important component of any financial plan of a business, it is essential that the costs relating to debt, like interest, are minimised. Hence, businesses are often found hunting for the best deal as far as interest rate is concerned.
In the current economic atmosphere, the interest rates are steadily rising. Although the Reserve Bank of India kept its benchmark policy repo at an unchanged 6.5% during its April 2023 meeting, this pause came only after delivering six straight hikes, from a repo rate of 4%. It is widely expected that there will be further increase in the repo rate.
To encourage entrepreneurs to set up their units in the industrially backward talukas, Goa government has modified its ‘Interest Rebate Scheme’ and made it even more attractive, for providing cheap loans to eligible businesses. The maximum interest rebate offered under this scheme is capped at 9% per annum with a ceiling of Rs 25 lakh per annum. The name of the scheme is ‘Mukhyamantri Modified Interest Rebate Scheme’ and is offered to borrowers via the Economic Development Corporation (EDC). The scheme will be implemented for a period of five years, starting from April 1, 2023 to March 31, 2028, and it applies to both new and existing industrial/MSME loans disbursed by EDC.
The above scheme is available to a unit in all verticals of business except: Alcohol and liquor of all types, barge sector, construction of commercial and residential complexes, transport sector, sponge iron, steel ingots/rolling mills, tobacco products and mining equipment and machinery.
The various benefits which can be claimed are: Geographical criteria - Units located in industrially under-developed talukas of Goa (Pernem, Sattari, Sanguem, Quepem, Canacona, Bicholim and Dharbandora) are eligible for an interest rebate of 5% pa.
Units promoted by Resident/Non-Resident Goan Entrepreneurs will include the following 3 categories: Native Goans, Promoters who are resident of Goa for not less than last 15 years and Persons of Goan origin (PGOs), Non-Resident Goans (NRGs) etc. In case of partnerships and limited companies, the effective shareholding of the resident/non-resident Goan entrepreneurs and/or shareholding of the resident/non-resident Goan entrepreneurs in other shareholder entity/entities if any, shall not be less than 74% of the total paid up capital. Any units set up by above persons will qualify to get an interest rebate of further “ 2% pa.
In Units promoted by Women Entrepreneurs, the effective shareholding of the women entrepreneurs in the partnership/limited company and/or shareholding of the women entrepreneur in other shareholder entity/entities if any, should not be less than 74% of the total paid up capital. Any units set up by women as per above criteria,
will be eligible to get an additional interest rate rebate of “ 2% pa.
Units employing Goans is the latest addition to the scheme. All the units employing 20 or more Goan employees will exclusively be eligible to receive an additional 2% interest rebate. A unit can combine any of the above schemes and try to get a maximum of 9% rebate on interest rate. Considering that the interest rates normally vary between 11 to 13%, a 9% interest rebate essentially means that the effective rate of interest can be a paltry 2 to 4%!
Considering the market conditions, this scheme forms the basis for an excellent source of low-cost debt for companies looking for capital to grow exponentially. With India’s growth story being one of the few positive beams of light worldwide, such an incentive would certainly help the Goan industry to capitalise on the positive economic climate.
›The writer, a Fellow Chartered Accountant (FCA) specialising in Goods & Services Tax, Transfer Pricing and Income Tax, has co-authored the book ‘Compendium of Industrial Policy for MSMEs in Goa’ released by ICAI
