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Overview

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 of MSME Industries

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.

  • Micro-Enterprise

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 Registratio

  • 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.

Recent Updates

  • 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.

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FAQs

Yes, MSME / Udyog Aadhaar registration is replaced with Udyam Registration. As per notification of MSME dated 26.06. 2020, Udyam Registration is the new process of MSME/ Udyog Aadhar Registration launched by the Ministry of Micro, Small and Medium Enterprises effective from July 1, 2020.
Yes, Aadhaar Number is mandatory for issuance of Udyam/ MSME Certificate.

Helpful resources

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Udyam Registration or MSME About, Procedure, Benefits and Documents required

Udyam Registration is the new process of MSME/Udyog Aadhar Registration launched by the Ministry... Read More

22 Jul, 2021

By CA Swati Agarwal

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