Exemption & Compliance⏱️ 7 min read📅 Updated: 4 Sept 2026
💬Share on WhatsAppMSE EMD Exemption Rules & Turnover Relaxation on GeM Portal
Understand how Micro & Small Enterprises can claim 100% EMD waiver and turnover criteria relaxation under Public Procurement Policy 2012 on GeM.
The Public Procurement Policy for Micro & Small Enterprises (MSEs) To encourage small businesses, the Government of India notified the **Public Procurement Policy for Micro and Small Enterprises Order, 2012**. Every Central Ministry, Department, and PSU is legally mandated to procure a minimum of **25%** of their total annual purchases from MSEs, with 4% earmarked for SC/ST-owned MSEs and 3% for Women-owned MSEs.
Three Crucial MSE Benefits on GeM 1. **100% Exemption from Earnest Money Deposit (EMD)**: Eligible MSEs are completely exempt from depositing bid security or EMD amount, regardless of whether the tender is ₹10 Lakhs or ₹100 Crores. 2. **Relaxation of Prior Turnover & Prior Experience**: Under Rule 173(i) of GFR 2017 and Ministry of Finance circulars, buyers can relax norms of prior experience and prior turnover for all MSEs, subject to meeting technical specifications and capability criteria. 3. **Purchase Preference in Price Band (L1 + 15%)**: If the lowest quoted price (L1) is from a non-MSE company, all participating MSEs whose prices fall within L1 + 15% are invited to match the L1 price. On matching, the order is split and 25% of quantity is awarded to the MSE.
Critical Catch: Manufacturers vs Traders A frequent mistake made by vendors is bidding as an MSE Trader: - **Eligible**: Micro & Small Enterprises registered under Udyam as **Manufacturing** or **Services** enterprises for the relevant NIC code. - **Ineligible**: Traders/Retailers/Wholesalers holding Udyam are **NOT** eligible for EMD exemption or procurement preference under Central Government policy, unless the buyer's specific custom ATC explicitly extends the exemption.
Frequently Asked Questions
Is Startup exemption the same as MSE exemption?
They are separate. Startups recognized by DPIIT get relaxation in prior experience and turnover regardless of their revenue, whereas MSE exemption depends on Udyam Registration classification.
Can an MSE be exempted from Performance Bank Guarantee (PBG)?
No. EMD is waived during the bidding phase, but if the MSE wins the contract, Performance Security / PBG (typically 3% to 5% of order value) is generally mandatory unless the buyer waives it in ATC.
How do I claim MSE exemption while bidding on GeM?
When filling the bid on GeM, select 'Yes' for MSE Exemption, enter your Udyam Registration Number, and upload your valid Udyam certificate verifying manufacturing/service category.
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