• Gross SGST Reimbursement - The scheme provides reimbursement on Gross SGST for all types of units. This step both simplifies the incentive and amplifies its benefit considering GST 2.0 reforms. Specifically, MSMEs gain from an increase in the total incentive ceiling and incentive period.
• Capital Subsidy & Production? Linked Incentives – Additional incentives such as capital subsidy and production?linked incentives are being offered to certain specified industries for the first time under the Industrial Policy. This aims to support new investments as well as encourage higher production.
• Incentives for Zone A - Industries located in Zone A (i.e. zone considered as industrially developed area) are now eligible for incentives. This is a key change from earlier policies and opens new opportunities in these regions.
• Priority Service Sector Incentives - The scheme extends incentives to priority service sectors, recognising their role in generating employment and supporting economic growth.
• Invest Maharashtra Platform - The Invest Maharashtra platform has been introduced to provide a single window for investment approvals and facilitation, a move intended to make the investment process faster, simpler, and more transparent for businesses. 
• Further, a separate dedicated portal for MSMEs is proposed. The portal is expected to provide market access, financial assistance, Government-to-Business (G2B) and Business-to-Business (B2B) services, as well as a digital product catalogue to enhance visibility for the sector.
• Key Investor Facilitation Measure: The Industries Department will now house dedicated Commissionerate's for 'Industries', MSMEs' and 'Services', and to this effect will be renamed as the Industries, Investment and Services Department. 

• Investment in Plant and Machinery or Equipment 
• Turnover

The incentives mentioned are indicative in nature. Actual incentives available will have to be evaluated as per business plan and subject to the conditions specified under the policy. On the roll and in premises of the eligible Unit Please refer policy for zonal Taluk-based classification The operative guideline of the policy is yet to be announced.

Under MIISP 2025 however, the State has come up with is own classification of MSMEs based on investment made in Plant & Machinery or equipment only and it is as below:

Particulars	Investment in plant and machinery or equipment
Micro enterprise	Up to Rs 25 million
Small enterprise	Above Rs 25 million up to Rs 250 million
Medium enterprise	Above Rs 250 up to Rs 1,250 million

It is important to note that the investment to be considered is investment made in Plant & Machinery or equipment only as per MSMED Act provisions. For instance, let’s analyse a new project with the total fixed capital investment is Rs 2,000 million, planned as below:

Here, while the total investment crosses Rs 2,000 million, the investment made in P&M or equipment is limited to Rs 1,100 million and hence, this project will be classified under medium category of the MSME classification. 
b. Service SectorProjects in the service sector are categorised basis the minimum employment criteria. Units are required to hire and maintain minimum 50 to 350 employees on the payroll, based on the identified zone throughout the year.Projects that qualify and avail incentives need to ensure minimum 80 per cent local employment out of the total employment.Additionally, a dedicated MSME Policy is proposed to be introduced to facilitate the MSME Growth and ease of doing business.
Key Incentives under the PolicyWith the qualifying criteria identified, we can now dive into an overview of key incentives offered to the sectors. a. Manufacturing Sector: Basis the project classifications, we understand that incentives may vary for MSMEs and the other categories of projects. Let’s understand key incentives for MSME under manufacturing sector:  • Stamp Duty Exemption - 50 per cent to 100 per cent Stamp Duty exemption (based on area classification).• Gross SGST Reimbursement - This is a key incentive the state offers; and it is in the form of a 100 per cent reimbursement on the Gross SGST payable by the unit for 5 to 10 years. We’ve summarised the incentive zone-wise with the overall incentive ceiling available to a unit as below:

Sr. No.	Asset Head	Proposed Investment (Rs Million)
1	Land	200
2	Building	600
3	Plant & Machinery	1,100
4	Other Assets	100
Total		2,000

Taluka / Area classification	Overall Ceiling as  per cent of FCI	Eligibility period [Years]	Industrial Promotion Subsidy (IPS)
A	30 per cent	5	100  per cent of Gross SGST payable by the unit on the first sale of eligible product(s) billed and delivered within Maharashtra
B	40 per cent	7
C	50 per cent	7
D	60 per cent	10
D+	70 per cent	10
Vidarbha, Marathwada, Ratnagiri, Sindhudurg, Jalgaon and Dhule	80 per cent	10
No Industry districts, Naxalism Affected Areas and Aspirational Districts	100 per cent	10

 

• Capital Subsidy for Thrust Sector Units – Units working in the thrust sector and that qualify specific eligibility conditions mentioned in the policy are eligible to avail a subsidy of 50 per cent to 100 per cent of specified project capital (based on area classification); subject to 20 per cent of FCI up to Rs 250 million. 
• Interest Subsidy - Up to 5 per cent per annum capped at Rs 10 million; subject to minimum 5 per cent contribution of the investor.
• Product Linked Incentive (PLI) – Incentive of 1 to 1.5 per cent of incremental turnover is offered to qualifying Export Oriented Units (EOUs) for 5 years. The incentive is subject to ceiling limit of 10 per cent of the total FCI with annual ceiling of Rs 10 million.
• Electricity Duty Exemption and Power Tariff Reimbursement - 100 per cent electricity duty exemption along with Power Tariff subsidy of Rs 1 per unit for 3 years is offered to qualifying units. The power tariff subsidy comes with an overall cap of Rs 10 million.

Certain additional incentives such as employment-linked incentive, technology upgradation assistance etc, are also available to units. The overall incentive for MSMEs is capped at 30 per cent to 100 per cent of FCI (based on zonal classification as tabulated above) and an additional incentive of 10 per cent of FCI in Plant and Machinery is available to units qualifying specific criteria, subject to a cumulative upper limit of 120 per cent of FCI.

b. Service Sector

Now that we have understood the incentives available to manufacturing units, let’s understand what’s offered for MSMEs in Service Sector:

• Rental Assistance – Lease Rent is one of the key costs incurred by the service sector. Hence, up to 50 per cent of the rental cost, capped at Rs 10 million to 200 million is available to first 20 units for each district over a 5-year period.
• Electricity Duty Exemption – 100 per cent exemption is offered for a 3-year period for new units.
• Employment Linked Subsidy – A reimbursement of 50 per cent of the employer’s EPF contribution is available for a period of five years, subject to a ceiling of Rs 100 million per unit. The subsidy is admissible only for units employing eligible personnel, i.e., employees meeting the prescribed minimum monthly salary thresholds. Additionally, this incentive is available to a limited number of units, in accordance with the scheme’s overall cap. 

In addition to the above, certain incentives are offered to both Manufacturing and Service sectors. Here’s an overview of those incentives:

• Water Treatment and reuse - 25 per cent capital subsidy is granted for setting up Effluent and Sewage Treatment Plans in MIDC, industrial estates / parks capped at Rs 50 million.

Key considerations

With the incentive framework outlined, it becomes equally important for investors to understand the key criteria that determine eligibility and the quantum of benefits available under the policy. While the operative guidelines of the policy are underway, the key considerations are summarised below.

• Eligibility – The policy applies to manufacturing and service sectors, including 16 priority and thrust manufacturing sectors, 13 priority service sectors, and emerging sectors in both manufacturing and services. Additionally, the type of investment (new / expansion) plays a critical role in the quantum of incentive offered. An investor should refer to the operational guidelines  to understand conditions to be eligible as a new or an expansion unit. 
• Broadly, under Maharashtra’s Industrial policy an entity becomes eligible based on meeting the minimum fixed capital investment or minimum employment generation condition.
• Eligible investment period – Units must complete their total investment within the timeline as stipulated in the operative guidelines of the policy.
• Eligible investments – Usually, only capital expenditure directed towards increasing the productive output is eligible. Such expenditure would include buying machinery, equipment, cost of building and civil and infrastructure expenditure associated with the plant.
• Completion of effective steps – Maharashtra’s industrial policies outline certain effective steps and fulfilment of these steps indicate the eligibility of the project’s investment within the policy period. For example, effective possession of land / shed / gala by an eligible unit was an effective step identified under the previous policy. A project should evaluate its project to understand whether it qualifies the criteria.
• Location – The state identifies and divides each Taluk into developed, developing and under-developed zones and higher incentives are accordingly provided to the less developed zones to attract investments and industries. Hence, the location of the project is crucial in determining the incentive eligibility.
• Business Dynamics – Given that the key incentive is Gross SGST, businesses whose operations are largely focused on sales within Maharashtra are expected to benefit more from the policy on a relative basis. Thus, key business insights such as local customer base, expected turnover over the incentive period etc. need to be evaluated in detail for projects to optimise the incentives available.
• Local employment – The policy requires units to qualify the local employment condition to avail incentives. The condition stipulates that 80 per cent of the total direct employees need to be local persons. This condition becomes critical in qualifying for incentives under the policy.

GST Incentive is available on first sale of eligible products billed and delivered within Maharashtra – Another critical aspect in relation to availing the GST linked incentive is the first sale criteria. Incentives will be available for first sale only when such eligible product is delivered within Maharashtra, which implies companies catering to customers Bill-to-ship-to model and ultimate shipping outside Maharashtra will not be incentivised.

How to avail the incentives?

An entity needs to apply for incentives basis the form and structure that the policy defines and the application needs to be filed within specified timelines to avoid curtailment in benefits. The earlier policy required simultaneous online and offline submissions. With the proposed single window system to enhance ease of doing business, the application process is expected to transition to this unified portal. The 2019 Policy stated that an Initial application is to be filed by entities prior to commencement of commercial production and the Eligibility Certificate application can be filed after the production commences. 

A project looking to avail incentives should await the operative guidelines under this new policy to better understand the timelines and overall application process. 

Key Takeaway

This policy, through measures like a single window clearing system, has come with key measures towards improving the ease of doing business in Maharashtra. Further the introduction of incentives for Zone A, extension of incentives to the service sector, introduction of capital subsidy and production linked incentives for specific sectors and other similar measures present a strong commitment from the state towards creating a supportive and enabling environment for industries across manufacturing and service sector. 

Maharashtra also offers several sector specific policies, making it essential to compare these with the overall Industrial Policy to maximise available benefits. Conducting a holistic assessment at the outset enables industries to optimise incentives and align project structuring with policy objectives. 

MIISP 2025, with the key changes it has come up with, is set to strengthen the industrial ecosystem of Maharashtra!

About the authors: Bhavesh Thakkar is the Partner, Tax and Regulatory Services of Ernst and Young LLP, he has set up state incentives practice for EY in India and currently leads the same. He has 25+ years of professional experience with specialization in providing end-to-end services in relation to the fiscal incentives by State and Central Government. 

Nikhil Padhye, Senior Manager, Tax and Regulatory Services, Ernst and Young LLP, he is involved in advising businesses on industrial policy, investment structuring, and incentive optimisation.

Vaishnavi Luniya, Senior Consultant, Tax and Regulatory Services, Ernst and Young LLP, where she advises businesses on government incentive frameworks, industrial policies, and investment structuring.