Micro, Small, and Medium Enterprise is referred to as MSME. The Indian government passed the Micro, Small, and Medium Entrepreneurial Development Act, 2006, into law. The Ministry of MSME creates and manages MSME organizations that specialize in handling, maintaining, or fabricating goods and materials.
In a developing country like India, MSME businesses are the driving force behind economic expansion. Because these industries are successful, the overall economy benefits and expands. If the company is engaged in the transportation and distribution industries in India, the MSME Act allows registration in both of these categories. It is advantageous to have your company established under this certification even though the administration has not made it mandatory because it offers numerous benefits in terms of revenue, commercial setup, financial institutions, and mortgages.
MSME is frequently referred to as the cornerstone of our economy and makes a significant contribution to the socioeconomic development of the nation. The Indian government has consistently shown that it supports small businesses and unorganized trade.
Classification of MSME’s
The classification used prior to the introduction of the Micro, Small, and Medium Enterprises Development Act, 2005, was based on turnover and investment in plant and equipment. The production and service sectors were the two industries that made up MSME.
Existing MSME Classification
(Criteria based on Investment in Plant & Machinery or Equipment)
The Ministry of Micro, Small, and Medium Enterprises (MSME) underwent changes in 2020 as a result of the Aatmanirbhar Bharat Abhiyan (ABA). The criteria for MSME classification have changed with regard to annual turnover and investment in plant and machinery. Additionally, there is no longer a division between the manufacturing and service sectors.
Revised MSME Classification for Aatma Nirbhar Bharat
(Criteria based on Investment and turnover)
Features of MSME Registration
- It offers various workers and artisans’ jobs, loans, and other services.
- They support the expansion of small businesses and help entrepreneurs develop their skills.
- They offer credit facilities to the bank.
- It encourages the advancement, development, and modernization of science and expertise.
- By assisting large businesses or by providing other services, it fosters economic expansion.
Benefits of MSME Registration
Banks and Government offer collateral free loans
To provide collateral-free loans to the micro and small sector industries, the Government of India established the Credit Guarantee Fund Scheme (CGS).The Credit Guarantee Fund Trust (CGTMSE) was established by the Indian government in collaboration with the Ministry of Micro, Small and Medium Enterprises (MSME) and the Small Industries Development Bank of India (SIDBI) to provide credit to small and micro-scale businesses. A collateral-free automatic loan of up to 3 lakh crore was announced by the finance minister for small businesses to pay off debts and cover losses in COVID-19.
Reservation policies for the manufacturing sector
The Development and Regulation Act of 1951, which establishes reservation guidelines for the exclusive manufacture of goods, is regarded as a crucial law in favor of SSI (Small Scale Industries).
Direct exemptions on Income tax
According to the government programme, depending on their operations, businesses registered under MSME are directly exempt from paying income tax for the first year of operation. It provides significant relief for businesses from meticulous bookkeeping practices and challenging auditing procedures.
A subsidy for Bar Code registration
MSME-registered businesses are eligible for bar code registration subsidies. Barcodes are presented as parallel lines and numbers that can be read by machines. Barcodes are crucial for tracking products throughout the entire supply and chain management process.
Support against the delay of payment
The right to interest and a delay in payment for goods from customers is protected by the Ministry of Micro, Small, and Medium Enterprises. a law that places a strong emphasis on mediation, arbitration, and speedy dispute resolution.
Buyers are responsible for paying debts owed before the agreement’s start date if the business is a supplier of goods and is registered under the MSME act. If a date is not specified, a payment period of 15 days is permitted, but it cannot be longer than 45 days.
Minimum interest rates of banks
For businesses covered by MSME, there is a lower interest rate. The banks’ goals include a 20% increase in credit to micro and small businesses, a 10% annual increase in the number of bank accounts held by micro and small businesses, and a 60% increase in credit lending to small scale industries. Businesses that are MSME-registered gain access to loans for their initial foray into the market quickly.
15% subsidy of CLCSS
The Ministry of Micro, Small, and Medium Enterprises (MSME) has a programme called the Credit Linked CGSTI Subsidy Scheme (CLCSS) that supports the technological advancement of companies. The scheme, which was introduced by the Indian government in October 2000, offers a 15% subsidy up to a maximum of Rs. 15 lakhs. The scheme’s maximum loan amount for purposes of calculating subsidies is one hundred lakhs.
Concession in payment of electricity bill
If they submit an application to the electricity department, businesses with a registered MSME certificate are eligible for a discount on their electricity bills.
Reimbursement of ISO certification
If they submit an application along with their registration certificate to the appropriate authority, MSME-registered businesses can receive a complete exemption from the ISO certificate fees. To increase the performance of businesses that are registered as MSMEs at the time of bidding, ISO certification is necessary.
50% subsidy for registration of patent
After filing such an application with an MSME certificate, businesses registered with MSME are entitled to a 50% subsidy in patent registration.
How Do Companies Become MSMEs In India?
The MSME registration process is straightforward and makes entrepreneurship easy to promote.
Participants in MSME must complete the one-page “MSME / Udyam Registration” form.
The following details must be entered by registrants in the application form:
- Personal Aadhar Number
- The name of your industry
- The registered address of your Business
- Bank account details.
After submitting the form, applicants will receive an Udyam Registration Number.
No supporting documents need to be attested with the form; self-certification is sufficient to validate the data.
Documents Required for MSME Registration
Aadhaar and PAN cards are the only documents required for MSME registration. Due to the fact that MSME registration is entirely online, there is no requirement for document proof. The Udyam Registration Portal will automatically pull PAN and GST-related information on investment and turnover of businesses from the government databases. The Income Tax and GSTIN systems are completely integrated with the Udyam Registration Portal.
Businesses that are exempt from the GST law’s registration requirements are not required to pay GST. However, in order to obtain Udyam Registration, the businesses that must compulsorily register for GST under the GST regime must first have their GST registration.
In the upcoming years, MSME is likely to experience rapid growth as India’s entrepreneurial culture continues to flourish. By integrating them with other public or private institutions, the government continues to implement various policies and regulations for the growth of micro and small-scale industries.