MSME stands for Micro, Small and Medium Enterprises. In a developing country like India, MSME industries are the backbone of the economy. When these industries grow, the economy of the country grows as a whole and flourishes. These industries are also known as small-scale industries or SSI’s.
This registration is not yet made mandatory by the Government but it is beneficial to get one’s business registered under this because it provides a lot of benefits in terms of taxation, setting up the business, credit facilities, loans etc. The Micro, Small and Medium Enterprises are considered as a very significant piece of India’s legacy economic model and a part of the critical supply chain for products and services. This sector is the job creator as well as play a crucial role in providing large-scale employment and industrialization of rural and backward areas. In 2015-2016, according to the National Sample Survey (NSS) 73rd round, there were around 633.8 lakh unincorporated non-agriculture enterprises in the country which are dealing in different economic activities providing employment to 11.10 crore workers.
The MSME became operational on October 02, 2006. It was established to promote, facilitate and develop the competitiveness of the micro, small and medium enterprises. Small scale businesses play a vital role in improving the economy of any country. To encourage new and existing business, the government of India has launched many schemes to help small and medium scale businesses to sustain and grow. To avail all these beneficial schemes, you need to get your MSME registration done. MSME registration is also known as Udyog Aadhaar or SSI registration.
Classification under MSME Registration
An industry owner before applying for the registration for MSME should know the requisites to classify his company and must file his application in that category only in order to avoid any cumbersome technicalities. As a result of this, Government of India has come up with a set of rules and regulations for the industries in order to classify them. The classification is mentioned below:
- Micro industries– In applying for registration of these kinds of industries your investment shall not exceed 25 lakhs for companies in the manufacturing sectors and 10 lakhs for the service sector.
- Small industries– In small scale industries the investment shall not exceed 5 crores for companies in the manufacturing sectors and 2 crores for the service sector.
- Medium industries– when applying for medium industries your investment shall not exceed 10 crores for companies in the manufacturing sectors and 5 crores for the service sector.
Under the Aatmanirbhar Bharat Abhiyan (ABA), the government revised the MSME classification by inserting composite criteria of both investment and annual turnover. On 01 June 2020, the Finance ministry revised the criteria for annual turnover and investment to be eligible under MSME registration.
Any enterprise or entity would be classified as a Micro-enterprise, if the investment in plant and machinery is not more than Rs. 1 Crore and the turnover is not more than Rs. 5 Crore.
- Small Enterprise
Any enterprise or entity would be classified as a small enterprise, if the investment in plant and machinery is not more than Rs. 10 Crore and the turnover is not more than Rs. 50 Crore.
- Medium Enterprise
Any enterprise or entity would be classified as a Medium enterprise, if the investment in plant and machinery is not more than Rs. 50 Crore and the turnover is not more than Rs. 250 Crore.
As per the government, this notification has come into effect on 01 July 2020. Hence all enterprises should satisfy the above turnover criteria to be classified under the definition of Micro, Small and Medium Enterprises.
Procedure for MSME Registration/ Udyam Registration
- Fill the Application Form
The process of MSME registration can either be carried out offline or online. The applicant would have to fill in the application form with all details. After filing the application form the requisite documentation have to be prepared.
- Prepare Documentation
In the next step, the applicant is required to submit all the requisite documentation for the MSME application. All information asked for should be submitted as per the requirements for MSME registration. It takes about three working days for the documentation to be processed.
- Submit the Application
After providing the documents; the applicant is required to submit the same. Usually this would take about two to three working days for submitting the documentation. When the documents are submitted, the authority will verify the same along with the application.
- Issuance of Certificate
In the final step, the authority will verify the documentation. If all the documents meet the requirement of verification, the same will be accepted. The certificate of registration will be issued to the applicant.
- In an RBI update released in August 2020 all enterprises are required to obtain the udyog registration certificate. Lenders would require to take the udyog registration certificate from all entrepreneurs
- Udyog Memorandum and Udyog Aadhaar Memorandum of the MSMEs obtained till June 30, 2020 shall remain valid till March 31, 2021. All enterprises under the MSME which are registered till June 30, 2020 would require filing the new registration (Udyam Registration) in the portal before March 31, 2020.
- The Value of Plant and Machinery must be according to the Written down Value as per the requirements.
Documents Required for the MSME Registration
Aadhar Card: A Copy of proprietor’s Aadhar card or of director(s) or partner(s) in other cases like Udhyog Aadhar Registration
PAN card: A Copy of PAN card of the business entity; and of director or partner, if applicable.
Types of MSME Registrations
Provisional MSME Registration
This is given for entities which are yet to begin functioning. With provisional registration the MSME can:
- Obtain facilities for accommodation, land, etc.
- Obtain important approvals and NOCs
- Obtain clearances from regulatory bodies such as pollution control board and labour regulations
- Obtain term loans and working capital from financial institutions and banks under priority sector lending.
A PRC (provisional registration certificate) is allotted to new enterprises without any field enquiry and is valid for 5 years.
Permanent MSME Registration
It is given to industrial units that are already functioning. All the benefits available to MSMEs can be availed by them.
The following conditions have to be met for getting a permanent registration:
- The unit has obtained statutory and administrative clearances as required
- The unit does not violate any regulation or restriction
- The value of plant and machinery in the unit does not exceed the prescribed limits
- There should be proof the enterprise is not owned, a subsidiary of or controlled by another industry.
Benefits of MSME Registration
The following are the major benefits given to registered MSMEs under the Micro, Small & Medium Enterprises Development (MSMED) Act:
- You can get collateral-free loans from banks under the credit guarantee fund scheme for micro and small enterprises (CGS)
- Some items have been earmarked to be manufactured only by small scale enterprises
- Once you get the MSME certificate for your microenterprise, it gets much easier to get licenses, registrations, and approvals for the same. Being able to show your MSME certificate while making these applications will speed up the process
- You get special consideration for participating in international trade fairs, exhibitions, and buyer-seller meets. You can also hold international seminars and conferences which are in the interest of MSME sector
- When you have MSME registration, you get many things done at a subsidised price: barcode registration, NSIC performance and credit ratings, industrial promotion subsidy (IPS) subsidy, ISO certification, electricity bill, and patent registration
- The interest rate charged by banks for MSME registered enterprises is lower than the normal interest rate
- To promote technological growth among the micro industries CLCSS scheme was introduced that provides 15% capital subsidy up to 15 lakhs for the purchase of plant and machinery
- While applying for a government tender, the ministry of micro, small and medium enterprises gives the following benefits to a microenterprise:
- Tender sets can be issued free of cost
- They are exempted from paying earnest money
- Security deposit is waived up to a certain monetary limit.
There are many other benefits under the Act and benefits are introduced through annual budgets as well.
MSME schemes launched by the Government are:
- Prime Minister Employment Generation Programme and Other Credit Support Schemes –
- Prime Minister Employment Generation Programme(PMEGP)
- Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE)
- Interest Subsidy Eligibility Certificate (ISEC)
- Development of Khadi, Village and Coir Industries –
- Science and Technology Scheme
- Market Promotion & Development Scheme (MPDA)
- Revamped Scheme Of Fund for Regeneration Of Traditional Industries (SFURTI)
- Coir Vikas Yojana (CVY)
- Technology Upgradation and Quality Certification –
- Financial Support to MSMEs in ZED Certification Scheme
- A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship (ASPIRE)
- National Manufacturing Competitiveness Programme (NMCP):
- Credit Linked Capital Subsidy for Technology Upgradation
- Marketing Support/Assistance to MSMEs (Bar Code)
- Lean Manufacturing Competitiveness for MSMEs
- Design Clinic for Design Expertise to MSMEs
- Technology and Quality Upgradation Support to MSMEs
- Entrepreneurial and Managerial Development of SMEs through Incubators
- Enabling Manufacturing Sector to be Competitive through QMS&QTT
- Building Awareness on Intellectual Property Rights (IPR)
- Marketing Promotion Schemes –
- International Cooperation
- Marketing Assistance Scheme
- Procurement and Marketing Support Scheme (P&MS)
- Entrepreneurship and skill Development Programme –
- Entrepreneurship Skill Development Programme (ESDP)
- Assistance to Training Institutions (ATI)
- Micro & Small Enterprises Cluster Development (MSE-CDP)
- Scheme of Surveys, Studies and Policy Research
- National SC-ST-HUB
- Scheme of Information, Education and Communication
Which Entity can apply for MSME Registration Process?
The following entities can apply for the MSME registration process:
- Sole Proprietor
Any business which has an individual carrying out and managing the affairs can apply for the MSME registration.
A partnership is a formed of business entity where two or more individuals have an agreement to share the profits of the business. The business of a partnership can apply for the MSME registration process.
- Limited Liability Partnership
A limited liability partnership is governed by the provisions of the limited liability partnership act, 2008 (LLP Act 2008). The statuses of the partners are limited to the amount of contribution made by the partnership. LLPs can apply for MSME registration process.
- Producer Company
Any company which is engaged in activities related to producing agriculture produce is known as a producer company. Such companies are present under section 465(1) of the provisions of the Companies Act, 2013. As agricultural activities are one of the main activities of MSMEs, hence this form can go for the above registration.
- Private Limited Company
Any company which is registered under the Companies Act, 2013 or previous company law 1956 can engage in activities of an MSME.
- Hindu Undivided Family
An HUF would have a karta as the manager of the HUF. Apart from the Karta, there are other members of the HUF. A HUF can do MSME registration.
- One Person Company
An entity which is registered as a one person company can go for the process of MSME registration.
- Co-operative Society
Any entity which is registered under the Co-operative societies act can go for MSME registration.
Regulatory Body/ Authority for MSME Registration
The primary regulatory body for MSME registration process is the Ministry of MSME. Apart from this institution, the office of development commissioner of the MSME is authorised by the Additional Secretary and Development Commissioner (MSME).
Apart from this above, there are additional bodies which look after the developments of their respective sector. Such bodies will include the following:
- Khadi and Village Industries Commission
This looks into the activities related to Khadi and Village Industries on a national basis.
- Coir Board
The Coir board looks into the activities of the Coir industry. Apart from this regulation is also governed under this sector.
- National Small Industries Corporation Limited (NSIC)
This organisation was established mainly to promote the activities related to developments of Micro, Small and Medium Enterprises in India.
Functions of the ministry apart from MSME REGISTRATION:
Apart from looking after the formation of MSMEs, the ministry also takes part in handling all the below activities:
- Credit Flow
The ministry of MSME ensures that there is proper credit flow in this sector.
- Technology Development
The ministry ensures that technology is properly utilised in this sector to contribute to different form of activities.
- Upgrading Infrastructure
Apart from the above the ministry also ensures that infrastructural capability is present in these sectors.
- Provide Certification
The ministry also provides quality assurance and certification related to procedures and processes which are utilised in this sector.
- Develop Technology Process
Along with technology development, the ministry will ensure that technology processes throughout the systems in this sector is developed.
- Skill up Gradation
Promoting development, skills and entrepreneurship is one of the main motives of this ministry. Through various programs, promotion of development of industries can be achieved.
- Development and Product Design
For MSME registration, the government will also assist by providing programs for development of designs and other processes.