MSME (Micro, Small and Medium Enterprises) are the business entities that drive our economy at grassroots level and contribute to its growth. In a developing country like India, MSMEs are the backbone of the economy and contribute largely in the socio-economic development of the country. The government has always encouraged small and medium industries and always been in favor of providing benefits to them. That’s why there are many benefits of MSME registration. There are many benefits of MSME registration in India, which can be only availed if the business had registered itself as an MSME/SSI under MSME Act. As per revised definition, MSMEs are classified in two categories, such as manufacturing and service enterprises.
- Eligibility for MSME registration(As per Revised MSME Definition)
- Benefits of MSME Registration
- 1. Collateral-Free Loan Facilities & Priority Lending
- 2. Credit Linked Capital Subsidies for MSMEs
- 3. Low Interest rate on loan
- 4. ISO Certification Charges Reimbursement
- 5. Incubation Scheme For MSME
- 6. Market Development Assistance Scheme for MSME
- 7. Subsidy on Patent Registration
- 8. Protection against Delayed Payments
- 9. 100% tax exemption for Innovative startups
- 10. Concessions on Electricity Bills
- 11. Tender Preference to MSME
- 12. Prime Minister Employment Generation Programme for MSMEs
- What is the fees for MSME registration?
- Documents required for MSME registration
- FREQUENTLY ASKED QUESTIONS
Eligibility for MSME registration
(As per Revised MSME Definition)
Under the new definition, manufacturing and service MSMEs will be defined under a common metric that will be a mix of investment in plants and machinery or equipment and turnover.
Benefits of MSME registration is not extended to trading activities as trading companies are just like middlemen, who just mediate to sell finished goods and create a link between manufacturer and customer.
Benefits of MSME Registration
1. Collateral-Free Loan Facilities & Priority Lending
To provide relief to millions of small businesses reeling under the impact of Covid-19 and lockdown in the country, Finance Minister has announced Rs 3 lakh crore collateral-free automatic loan. These loans will have a 4 year tenure and 100 percent guaranteed. It has moratorium for 4 months and the scheme can be availed till October 31, 2020. This is expected to benefit 45 lakh units, allowing them to resume activity and safeguarding jobs. Banks and NBFCs will offer up to 20 per cent of entire outstanding credit as on February 29, 2020, to MSMEs. Units with upto Rs 25 crore outstanding credit and Rs 100 crore turnover are eligible for taking these loans. In present scenario, it is most popular benefits of MSME registration.
Govt will also provide equity support to stressed MSMEs and facilitated the provision of Rs. 20,000 crore as subordinate debt. Under this scheme promoters of the MSME will get loan by the banks, which will be infused by promoter as equity in the MSME Unit. Subordinated debt facility will aid 2 lakh stressed MSMEs.
There is also a Rs 50,000 crore equity infusion for MSMEs through Fund of Funds; to be operated through a Mother Fund and few daughter funds; this will help to expand MSME in size as well as capacity.
2. Credit Linked Capital Subsidies for MSMEs
Technology-driven MSMEs may not be able to use their resources to full potential due to lack of the latest technology. Under this scheme, MSMEs are provided upgraded technology to replace their old and obsolete ones. The Scheme aims to provide 15% capital subsidy for technology upgradations. There is also a ceiling in 15% capital subsidy which is 15 Lakh for induction of well established and improved technology. It is given for in approved sub-sectors/products. Details of the scheme can be found here
3. Low Interest rate on loan
Businesses or enterprises after obtaining MSME registration certificate can avail a benefit of 1% on the Overdraft loan and as per Union budget 2019 MSMEs registered under GST can get 2% interest subvention. It is available for incremental loans of Rs 1 crores under the MSME Credit Scheme
4. ISO Certification Charges Reimbursement
There has been given relaxations to MSMEs from all expenses incurred for obtaining ISO 9000, ISO 14001, and HACCP certifications. It will promote the standards and certifications in order to enhance their performance across sectors.
5. Incubation Scheme For MSME
The incubation scheme has been launched in May 2019 to provides opportunity to the innovators in developing their new innovative ideas for the creation of new innovative products. Nature of assistance are as follows:
• Under this scheme financial assistance up to 15 lakh is provided for developing and nurturing of an idea.
• Financial assistance up to 1.00 Cr. is provided for procurement and installation of Plant and Machines in BI. This will strengthen the technology-related R&D activities of BI.
• Financial assistance of up to 1.00 Cr. provided as grants in aid for the seed capital support to HIs/BIs for promoting them to converting their ideas into start-ups.
6. Market Development Assistance Scheme for MSME
Under this scheme, The Central Government follows a Price and Purchase Preference policy Wherein around 358 items are listed for exclusive purchases by Central Government from the MSME units only. They are numerous support like marketing assistance even for those products, which are manufactured by MSMEs and do not fall under the purview of Reservation Policy.
7. Subsidy on Patent Registration
More than 50% subsidy is given to the Enterprise that has the certificate of registration granted by MSME. Fees for patent registration for MSMEs has been reduced to Rs 1,600 or Rs 1,750 from Rs 4,000 or Rs 4,400 respectively. For expedited examination, it is reduced to Rs 8,000 from Rs 25,000 earlier. Similarly, for renewal of patents, the fees has been reduced. For design applications filing, fees for MSMEs and startups has been reduced to Rs 1,000 from Rs 2,000.
8. Protection against Delayed Payments
At times, the buyers of services or products from the MSME’s or Small Scale Industries tend to delay the payment. MSME ministry provided a helping hand to such enterprises by giving them the right to collect interest on the late payments from buyers. The settlement will be done through conciliation and arbitration and it will be resolved in minimum time.
Payment term are provided under this rules are-
- On or before the agreed date of payment or
- In case there is no mention of the date of payment, Within 15 days from the day they had accepted the goods and services from MSME or SCI registered business.
The Micro, Small and Medium Enterprises Development Act, 2006, has made strict provisions for charging of interest so that problem of delayed payment can be mitigated. In these provisions, if any buyer fails to make payment to MSMEs as per agreed terms or a maximum of 45 days, Buyer need to pay monthly compounded interest which is three times of the rate notified by the Reserve Bank of India.
9. 100% tax exemption for Innovative startups
No Income Tax required to be paid in 3 year out of 7 Years – ie. Startups are eligible for getting 100% tax exemption on profit for a period of three years in a block of seven years provided that annual turnover does not exceed Rs 25 crores in any financial year. It is Allowed by way of Deduction under Income Tax Act. In this deduction, Companies upto 10 Years in existence are still considered startup. Income Tax Law also Allows credit for minimum alternate tax (MAT) to be carried forward for up to 15 years instead of 10 years.
10. Concessions on Electricity Bills
Govt has provided relief to registered MSMEs in electricity bills. For taking this benefits unit must have MSME registration and they have to make an application to the department of the electricity along with the MSME registration certificate.
11. Tender Preference to MSME
From time to time government has announced many tenders where only MSME Industries can apply. Recently, as a part of Covid-19 relief package, the Finance minister has announced that there are issues of unfair competition from foreign companies in government procurement tenders due to the size and strength differ and govt will not allow global tenders in such schemes up to Rs 200 crore.
12. Prime Minister Employment Generation Programme for MSMEs
This scheme provides a subsidy for Employment Generation. The national-level nodal agency is Khadi and Village Industries Commission (KVIC) and it implements the scheme at national level. At the State level it is implemented through State KVIC Directorates, State Khadi and Village Industries Boards, District Industries Centres and banks. The Government subsidy under the Scheme is routed by KVIC through the partner banks for distribution to the entrepreneurs directly in their Bank accounts.
There are many other benefits of MSME registration like credit rating support, quality support etc.
What is the fees for MSME registration?
There is No Fee for MSME Registration. The relevant form for filing of MSME registrations is Udyog Aadhar Memorandum for registration for MSMEs in India. There is no fees for MSME registration and it is a very simple process.
Documents required for MSME registration
1. Incorporation Documents
- Incorporation documents for partnership firms are- Partnership deed and registration certificate.
- In case of company, copies of the Memorandum and Articles of Association must be submitted. A copy of the board resolution authorizing the registration of the company as an MSME is also required.
2. Cancelled Cheque
3. Copy of sale or purchase bill
4. PAN card
5. Aadhar Card
6. Business Address Proof
There are many options for business address proof like property possession letter/property tax receipt/Rent agreement/municipal corporation license/Electricity bills/rent receipts. In case of rental property No Objection Certificate from the landlord is also needed.
7. Additional Documents
Since there are turnover and investment criteria for MSME eligibility hence all bills of purchase of machinery, Plant and equipment must be produced.
All these documents must be self-attested.
FREQUENTLY ASKED QUESTIONS
Is MSME updated to Udyog Aadhar?
Yes, Now Udyog Aadhar registration is required for MSME registration certificate. If any micro, small and medium industries want to start any business; they need to get the registration with MSME/Udyog Aadhaar
Is Aadhaar card compulsory?
Yes. For registration under the Udyog Aadhaar scheme, aadhar card is compulsory for a Sole Prop. In case an applicant is other than the proprietor, the Aadhar card of the partner and the director will be required.
Can existing and new businesses both apply?
There are no restrictions for old or new units. An existing and new unit both can apply for Udyog Aadhar registration. Provided the existing unit is functioning and meets the threshold limits for registration under MSME
What is the validity of the certificate?
There is no expiry of the Udyog Aadhar Certificate. As long as the entity is ethical and financially healthy there will be no expiry of the certificate
Can Trading companies (Who just buy and Sell finished goods) take the benefits of MSME registration ?
No. MSME covers only manufacturing and service industries. Trading companies are not covered by the scheme. Trading companies are just like mediators, who create a chain between manufacturer and customer. Hence trading companies are not covered under the scheme
Do I need multiple MSME registration for manufacturing plants in different cities?
No. Udyog Aadhar certificate is provided to the units irrespective of multiple branches or plants. However, All branches and plant details need to be submitted in the application for MSME registration.
What are the activities which are not eligible for MSME registration?
Ministry of MSME has clarified that the following activities would be specifically excluded as per Section 7 of the MSME Act-
1. Forest and Logging
2. Fishing and aquaculture
3. Wholesale, retail trade and repair of motor vehicle and motorcycles
4. Wholesale trade except for motor vehicles and motorcycles.
5. Retail Trade Except for Motor Vehicles and motorcycles
6. Households activities as domestic personnel employees
7. Undifferentiated goods and services-producing activities of private households for own
8. Activities of extraterritorial organizations and bodies