MSME (Micro Small and Medium Enterprises) Registration
An overview
As a part of Covid stimulus package MSME eligibility norms are redefined to bring almost 99% of business in India under MSME Act.
The MSME sector contributes to 45% of India’s Total Industrial Employment, 50% of India’s Total Exports and 95% of all industrial units of the country and more than 6000 types of products are manufactured in these industries (As per msme.gov.in).
Eligibility Criteria
Whether you are manufacturer, service provider or retailer eligibility norms are similar which are as follows:
MSME is classified based on composite criteria namely investment in plant & machinery or equipment and turnover in preceding financial year
| Criteria | Micro | Small | Medium |
|---|---|---|---|
|
Investment in Plant & Machinery or equipment |
Up to 1 crore |
Above 1 crore and up to 10 crore |
Above 10 crore and up to 50 crore |
|
And |
And |
And |
And |
|
Turnover |
Up to 5 crore |
Above 5 crore and up to 50 crore |
Above 50 crore and up to 250 crore |
Note:
- Both criteria need to be fulfilled , even if any of one criteria breaches the limit prescribed entity would be reclassified to upper category accordingly.
- Investment in Plant and Machinery or equipment would be auto populated in application form by referring to ITR filed for previous year, If ITR is not filed or business commenced in current year then such value needs to be given on self-declaration basis.
- Turnover is also linked to ITR / GST return filed in previous year if not filed then turnover needs to be given on self-declaration basis. Turnover excludes exports of goods / services.
Advantage of MSME registration
1. Collateral free loan at subsidized interest rate
The Government of India has made collateral-free credit available to all small and micro business sectors. This initiative guarantees funds to micro and small sector enterprises. Producing MSME certificate benefits to entitle one to avail this loan on a priority basis with fewer hassles.
In the absence of collateral security (any property/cash given as a security against a loan), many business owners may find it extremely hard to secure a loan for starting in their industry. However, with an MSME Registration, all banks are specifically instructed to offer loans at interest rates lower than the usual and one may be able to avail this benefit from several banking institutions for their financing needs.
2. Credit linked Guarantee scheme
Ministry of Micro, Small and Medium Enterprises and Small Industries Development Bank of India (SIDBI) jointly established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) in order to implement Credit Guarantee Scheme for Micro and Small Enterprises. The corpus of CGTMSE is contributed by Government of India and SIDBI. 75% of the loan amount to the bank is guaranteed by the Trust Fund.
Collateral free loan up to a limit of ₹ 100 lakh is available for individual MSE on payment of guarantee fee to bank by the MSE.
3. Subsidy on patent registration
A hefty 50% subsidy is given to the Enterprise that has the certificate of registration granted by MSME. This subsidy can be availed for patent registration by giving application to respective ministry.
4. Protection against delayed payment
At times, the buyers of services or products from the MSME’s or SSIs tend to delay the payment. The Ministry of Micro, Small and Medium Enterprise lend a helping hand to such enterprises by giving them the right to collect interest on the payments that are delayed from the buyer’s side. The settlement of such disputes must be done in minimum time through conciliation and arbitration.
In case, if any MSME registered enterprise supplies any goods or services to a buyer then the buyer is required to make the payment on or before the agreed date of payment or within 15 days from the day they had accepted the goods and services from MSME or SCI registered business( if there is no mention of the date of payment).
If the buyer delays the payment for more than 45 days after accepting the products or services then the buyer has to pay compound interest along with interests (monthly) on the amount that was agreed to be paid. The interest rate is three times the rate that is notified by the Reserve Bank of India.
5. Concession on Electricity Bill
This concession is available to all the Enterprises that have the MSME Registration Certificate by providing an application to the department of the electricity along with the certificate of registration by MSME.
Enterprise resource planning (ERP)
Enterprise resource planning (ERP) software facilitates the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders.
Local databases
Local databases, can be small, simplified tools for managers and are considered to be a primal or base level version of a MIS.
6. Reimbursement of ISO certification cost
The registered MSME enterprises can claim the reimbursement of the expenses that were spent for the ISO certification.
MSME Registration Process
MSME registration is not mandatory but it is highly beneficial to have one since cost of registration is also zero.
MSME registration is to be done in the government portal of udyamregistration.gov.in. New entrepreneurs need to click the button “For New Entrepreneurs who are not Registered yet as MSME” shown on the home page for registering MSME. New registration of MSME is done by entering the Aadhaar card number with or without PAN Card.
For those entrepreneur wo has obtained EM-II or UAM registration earlier needs to be migrated to new MSME registration and should obtain registration certificate under Udhaym portal by giving UAM number and validated the details through OTP on or before 31th March 2021.
Details required for MSME registration
Aadhaar Card is the only document required for MSME registration. MSME registration is fully online and no proof of documents is required. PAN and GST linked details on investment and turnover of enterprises will be taken automatically by the Udyam Registration Portal from the Government databases. The Udyam Registration Portal is fully integrated with Income Tax and GSTIN systems. PAN and GSTIN number are mandatory from 01.04.2021 for registration. Registration without PAN and GSTIN can be done now but have to be updated with PAN number and GSTIN number within 01/04/2021 for avoiding suspension of registration. Those who have EM-II or UAM registration or any other registration issued by any authority under the Ministry of MSME, will have to re-register themselves in this Portal.