Every nation’s economic hopes are pinned on its young, small businesses. MSME enterprises are the backbone of any economy and are an engine of economic growth, promoting equitable development for all. The Indian government, with this in mind, offers numerous benefits to such organisations (cheaper credit, easy loan approval, tax exemptions, etc.), so that they can achieve growth at a much faster pace and without enduring hardships. To avail the benefits under the MSMED Act from Central or State Government and the Banking Sector, MSME Registration is required.
MSME stands for micro, small and medium enterprises and any enterprise that falls under any of these three categories. Though the MSME registration is not statutory but this registration is among one of the easiest of government registrations to be granted. As a small enterprise, you can have access to priority sector lending, tax exemptions & capital investment and power tariff subsidies. If, at any time, you cross this investment limit, you need to cancel your registration under the MSMED Act.
To be classified as a MSME, Enterprises in the Manufacturing sector need to have less than Rs.10 crores of investment in plant & machinery; service Enterprises must have an investment of less than Rs.5 crores of investment in plant & machinery.
A Micro Enterprise in the manufacturing sector is an enterprise with less than Rs. 25 lakhs of investment in plant & machinery. A Micro Enterprise in the service sector is an enterprise with less than Rs. 10 lakhs of investment in plant & machinery.
A Small Enterprise in the manufacturing sector is an enterprise with more than Rs. 25 lakhs but not exceeding Rs. 5 crores of investment in plant & machinery. A Small Enterprise in the service sector is an enterprise with more than Rs. 10 lakhs but not exceeding Rs. 2 crores of investment in plant & machinery.
A Medium Enterprise in the manufacturing sector is an enterprise with more than Rs. 5 crores but not exceeding Rs. 10 crores of investment in plant & machinery. A Medium Enterprise in the service sector is an enterprise with more than Rs. 2 crores but not exceeding Rs. 5 crores of investment in plant & machinery.
Some Key Facts
Computation of turnover
For a registration, total plant and machinery cost should be up to Rs. 25 crore for manufacturing units and Rs. 10 crore for service units. While calculating this number, the value of land and building will not be counted toward the total investment. Also, the original cost of the equipment and plant and machinery is taken into account. Depreciation cannot be factored in.
When to apply
One should I apply before commencing operations because you can avail of a Provisional SSI Registration Certificate (PRC). The PRC will enable the unit to obtain term loans and working capital under priority sector lending and make it easier to procure various NOCs and clearances from regulatory bodies, such as Pollution Control Board.
The PRC expires at the end of five years, at which point you may re-apply if the unit is not yet operational, or if the unit exceeds investment limits set by the MSMED Act. Once you commence operations, you can apply for the Permanent License.
What documents are required for the application?
You may apply for the PRC without an industrial license in case your unit is listed in Schedule-III of the Industrial Licensing Exemption Notification. Other units must first acquire an industrial license. The unit should also have obtained all other clearances, whether statutory or administrative, for example, a drug license under the drug control order or a No Objection Certificate from Pollution Control Board, if required. The unit should not violate any locational restrictions in force. The unit should not be owned, controlled or subsidiary of any other industrial undertaking. The PRC is issued based on the application form. No field enquiry is made.
MSME Registration is done online but each state have a separate DIC (District Industries Centre) department. These authorities approved the MSME Registration Certificate with the MSME Number. Even if you want to avail the scheme or benefits under the MSME then you have to contact to your nearby DIC Department for the same.
The registration process simply requires you an application for the MSME registration that has to be prepared and submitted to the respective government office according to the latest rules and regulations.
In addition to it, one has to file its personal details of the kind of the industry they want to run and some of the respective documents as mentioned below:
- Your Aadhaar Number.
- Name of Applicant.
- Social Category.
- Name of Enterprise / Business.
- Type of Organization you are opting for.
- Your PAN number.
- Location of Plant you are setting up in a place.
- Your current office Address.
- Mobile Number.
- Your E- Mail ID.
- Date of Commencement of Business.
- Your Bank Account Number.
- Bank IFS Code.
- Main Business Activity of Enterprise
- NIC 2 Digit Code.
- Additional details about Business.
- Number of employees
- Investment in Plant & Machinery / Equipment
- Attachment of your scan copy of Aadhaar card
The usual time is between 2-3 days to complete all the documentation of the registration.
Maintenance of records
Any entity with an SSI Registration that fails to follow any regulations laid by the government will be deregistered. Also, in case you exceed the investment limits, as noted below, your firm’s registration will be cancelled.
Banking & Credit
MSME Registration Certificate treat as legal entity proof of the business so you can easily open a current bank account or mentioned your registration while making another license like GST Registration etc.
All banks and other financial institutions recognise MSMEs and have created special schemes for them. This usually includes priority sector lending, which means that the likelihood of your business being sanctioned a loan is high. Bank loan interest rates will also be lower. There may also be preferential treatment in case of delay in repayment
The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS) was launched by the Government of India to make available collateral-free credit to the micro and small enterprise sector. Both the existing and the new enterprises are eligible to be covered under the scheme. The Ministry of Micro, Small and Medium Enterprises, Government of India and Small Industries Development Bank of India (SIDBI), established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises
Under this scheme all the major banks have some policy regarding the banks’ loan for the MSME which are following –
- 40% of the total advances must go to micro and small enterprises involved which are in manufacturing having investment in plant and machinery up to Rs.10 lakh and for service enterprises having investment in equipment up to Rs.4 lakh.
- 20% of the total advance to micro and small enterprises should go to manufacturing enterprises that have above Rs.10 lakh till Rs.25 lakh investment in the plant and machinery and for service enterprises that have investments in equipment above Rs.4
- To simplify, 60% of the advances must go to micro enterprises.
- Under the International Cooperation Scheme, financial assistance is provided on reimbursement basis to the State/Central Government organizations, industries/enterprises Associations and registered societies/trusts and organizations associated with MSME for deputation of MSME business delegation to other countries for exploring new areas of MSMEs, participation by Indian MSMEs in international exhibitions, trade fairs, buyer seller meet and for holding international conference and seminars which are in the interest of MSME sectors
- Enterprises that have MSME Registration can avail Bar Code Registration subsidy as mentioned in the scheme
- Enterprises that have MSME Registration are eligible for Industrial Promotion Subsidy (IPS) as mentioned in the scheme
- Enterprises that have MSME Registration are eligible for Counter Guarantee from Government of India through CGSTI.
- Enterprises that have MSME Registration Certificate can avail 50% 50% subsidy for patent registration by making application to respective authority
- The Ministry of Micro, Small and Medium Enterprises gives following benefits to enterprises that has MSME Registration while making application for Government Tenders:
- Issue of tender sets free of cost
- Exemption from payment of Earnest Money
- Waiver of Security Deposit upto the Monetary Limit for which at the unit is registered
- Enterprises that have MSME Registration Certificate can avail Concession on electricity bill by making application to electricity department along with MSME Registration Certificate
- Enterprises that have MSME Registration Certificate can reimburse ISO Certificate Expenses by making application to respective authority along with MSME
- Enterprises that have MSME Registration have preference in procuring government tenders. Special treatment is given to MSME Registered organization while making application for government tenders.