MSME Registration

What does MSME mean? Let’s start with the basics - MSME, which stands for Micro, Small, and Medium Enterprises, is the backbone of India’s economy. The term ‘MSME’, introduced for the first time in 2006 by the country’s government, isn’t just a term anymore, as it is a livelihood for millions of people and a hope for a bright future for the country. The true significance of the MSME sector is reflected in the figures, as there are more than 7.9 million registered micro, small, and medium enterprises currently operating in the country. If you still don’t understand what we are trying to emphasize, look at it this way.

Today’s MSME industry segment alone is responsible for one-third of India’s entire GDP; not just that, it’s also the reason over 120 million people have employment across different industries and regions.

The role that the MSME sector plays in the “Atma-Nirbhar Bharat” can’t be underestimated at any cost, and that’s why the Indian government has also been contributing its major part to the growth of this sector. Wondering, How? The Ministry of Micro, Small, and Medium Enterprises has recently introduced a number of schemes and programs to boost new entrepreneurs, especially small businesses. But to avail of the benefit of these, one must register as MSME, or we can say, get MSME Registration.

What is Micro, Small & Medium Enterprises (MSME)?

When does an economy thrive? An economy sees growth with the creation of new enterprises and the development of existing ones. That’s what the Micro, small, and Medium enterprises are doing now. In the movement to strengthen the Indian economy, they are giving a positive direction to the “Make in India” initiative and transforming the country into a global manufacturing giant. Just think, where did you get to hear the term “Entrepreneurship” around a decade ago? But now, the situation is different when entrepreneurial waves are everywhere.

Being responsible for over 45 percent of manufacturing output and 40 percent of exports, Indian MSMEs are impressively meeting the rising demands of both the domestic and international markets. The best part about MSMEs is how they’re dispersed across almost every sector, giving a voice to diversity, be it social, economic, or cultural. Here, the role of the Indian government also cannot be ignored. Apart from offering benefits, such as tax incentives, subsidies, and capital grants, the government is also showing a way to tap the potential of businesses with MSME registration.

For now, the country's people can go for self-employment and make a difference with their skills and knowledge. Here, the major focus of the government is also to promote diversity and inclusivity by bringing the under-represented sections, such as first-generation, women, and marginalized communities to the mainstream economy. 

What Does MSME Registration Mean?

MSMEs are enterprises engaged in manufacturing or offering goods and services, respectively, and their continuous development is crucial for the country’s economy. That’s why the government of India has been proactively encouraging them through subsidies, financial assistance, tax incentives, and skill development programs. However, the trick is to enjoy these benefits; eligible businesses must get MSME certificates. With MSME registration, a business gets to open the door to government-backed rewards and incentives, which can be both monetary and non-monetary.

What is an MSME Registration Certificate? 

The Ministry of MSME introduced the Udyam Registration Portal with an aim to encourage digitization in India and simplify the processes. This tech system is built to assist small and medium businesses by empowering their growth and providing necessary support. 

In India, the Ministry of MSMEs issues the Udyam Registration Certificate, also known as the MSME Registration Certificate. This certification is necessary for seeking legal or operational efficiency for small and medium-sized businesses. 

Who can apply for Udyam Registration? 

MSME Udyam registration may be applicable to industries associated with manufacturing, wholesale and retail trade that meet the MSME classification requirements. For instance, listed below are entities that are deemed eligible for this registration:

• Startups, business owners
• Sole proprietorship
• Partnership firm registration
• Trusts 
• Limited liability Partnerships (LLPs) 
• Public & Private Limited company 

Is Udhyog Aadhar & MSME Registration the same?

Udyog Aadhar and MSME Registration are often perceived as synonymous, but they are distinct from each other. While Udyog Aadhar was introduced in 2015 for the registration of enterprises, the latter MSME Registration also known as Udyam Registration was introduced in 2020. 

After the notification of the new Udyam Portal for the registration of Micro Small and Medium Enterprises, the older Udyog Aadhar became obsolete. All new and old enterprises need to get MSME Registration through the new Udyam Portal. For fresh registrations, no Udyog Aadhar is needed while those who already have a Udyog Aadhar need to migrate their registration to the new Udyam Portal using their 12-digit Udyog Aadhaar number. Currently, the MSME (Udyam) Registration number is a 19-character long alpha-numeric code.

To fully capitalize on the advantages available, it is highly advisable to complete both your MSME and Udyog registrations for your business in India.

As per the new guidelines, the Udyam certificate benefits are found eligible for all those businesses that cater to these criterias. To define, Udyam Registration varies per three factors, which mainly depend upon- annual turnover, type of enterprise and followed by MSME investment. The following are the criterias that represent those conditions- 

• An MSME must depend upon these three categories, including micro, small and medium.
• The benefits offered by MSMEs might vary based on the annual turnover. The Registration along with the benefits are found to be eligible for cases-
• Micro-enterprises have a turnover of up to 5 crores. 
• Small firms have a turnover of up to 75 crores with medium firms having a turnover up to Rs 250 crores found to be eligible.  
• Udyam Registration has come to benefit the micro-businesses followed by the investments, which are below one crore.
• As per the medium businesses, it should be less than 50 Crores. 

What are Classifications of MSME?

Now that we know what MSME stands for and its significance, it’s time to look at the classification of MSMEs (Micro, Small, and Medium Enterprises). As per the Micro, Small, and Medium Enterprises Act 2006, recently amended in 2020, MSMEs are classified as per their yearly turnovers and investments in plant, machinery, or equipment. 

Micro Enterprises

• Investment in Plant, Machinery, or Equipment - Not more than INR 1 crore. 
• Yearly Turnover - Not more than INR 5 crore. 

Small Enterprises 

• Investment in Plant, Machinery, or Equipment - Not more than INR 10 crore. 
• Yearly Turnover - Not more than INR 50 crore. 

Medium Enterprises

• Investment in Plant, Machinery, or Equipment - Not more than INR 50 crore. 
• Yearly Turnover - Not more than INR 250 crore.

The MSME registration is voluntary, which means no business is legally mandated to obtain an MSME certificate to run its activities. However, if a business does choose MSME certification, it becomes eligible to avail of special schemes from banks, tax exemptions, subsidies, and many more. Let’s look at the major benefits Indian businesses get with MSME registration.

• Collateral-Free Loans

Entrepreneurs with out-of-the-box strategies and expertise fail to establish a successful business because of a lack of funding for continuously operating. The MSME registration plays an essential role here as the Indian government has made collateral-free financing available to all registered small and microbusiness sectors through CGTMSE. Being non-collateral in nature, even businesses with poor means can get them, provided they are registered as MSMEs. 

CGTMSE, which stands for Credit Guarantee Fund Trust for Micro and Small Enterprises, is jointly set up by the Ministry of Micro, Small & Medium Enterprises (MSME), Government of India, and Small Industries Development Bank of India (SIDBI) to make credit available to eligible businesses without any collateral/third-party guarantee.

• Give International Exposure

The way businesses operate is evolving with the changing world, and to ensure small businesses of the country don’t stay behind, the Indian government funds a delegation of businesses, including MSMEs, to visit International trade shows, exhibitions, conferences, etc. This way, the registered small businesses get an opportunity to share their expertise on the international stages and get exposure to recent happenings.   

• Lower Interest Rates

Businesses with MSME registration get eligible for bank loans at a much lower interest rate than those applicable to the rest of the enterprises. In fact, the Indian government has also put some targets in place to achieve for banks to lend to micro and small enterprises. This not only eases the burden on small businesses, especially with low working capital but also encourages them to take a step forward.

• Savings on electricity bills

Another benefit of MSME certification is the concessions on the electricity bill payments that the Indian governments offer to MSME-registered businesses. This move intends to encourage the MSME sector to expand its business activities without worrying about expenses, such as electricity or maintenance. 

• Patent Subsidy Registration

Many times small businesses or startups in the country fail to get patents for their inventions because of the extremely high cost of the patent registration process. However, with MSME registration, the businesses get eligible for a discount of 50% or 15 Rs lakhs (whichever is lesser) on the total cost of filing and processing a patent registration application. 

Apart from these benefits, businesses with MSME registration get to enjoy others, such as tax exemption, protection against delayed payments, reimbursement of ISO certification, and marketing and technological upgradation assistance.

Documents Required to obtain MSME Registration vary depending on the type of business structure.

Proprietorship Firm

• Shops and Establishment Certificate/Gumasta License.
• Address proof of the firm.

Private Limited/One-Person-Company

• Address proof of the company
• Certificate of Incorporation (CoC)
• Memorandum of Association (MoA)
• Articles of Association

Limited Liability Partnership (LLP)/Partnership Firm

• LLP Agreement/Partnership Deed
• The PAN card of the business
• Address Proof of the company

• Go to the official Udyam Registration Portal.
• Enter the asked details in the application form.

Note: The asked details can include Aadhar details, applicant’s name, company’s name, type of company, business activities, total investment in the business, etc.

• Next is to enter the OTP received on the registered contact number to validate the application for MSME registration.
• Upload all the required documents and proofs.
• The government authority will review the application for verification.
• If approved, the government will issue you an MSME certificate. You can download the unique registration number from the portal itself.

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• Zero Defect Zero Effect Scheme

With this scheme, the Indian government aims to create and implement the ‘Zero-Effect-Zero-Defect’ culture in the country. The motive behind this is to encourage Indian MSMEs to produce good quality products with zero defects, especially those that the country exports to other nations. There are three levels for ‘ZED’ certification - Bronze, Silver, and Gold and each of them has its benefits for the eligible business. 

• Pradhan Mantri Employment Generation Program

Shortly known as PMEGP, the Indian government has launched this scheme to make financial assistance available to self-employment ventures to create more employment opportunities for the country's unemployed youth. The key benefit of this scheme is subsidized loans with certain conditions to set up new micro-enterprises in the non-farm sector. 

• Credit Guarantee Scheme for Micro and Small Enterprises

This scheme is commonly referred to as CGTMSE; this scheme intends to encourage first-generation entrepreneurs to be self-employed by offering them credit guarantee support for collateral-free / third-party guarantee-free loans.

• Micro and Small Enterprises Cluster Development Program

With this scheme, the Indian government intends to enhance the productivity and competitiveness of MSEs by using the cluster development approach as a critical strategy. The objectives of this scheme are to set up common facility centres on the “Plug and Play” concept and address today’s key challenges, such as the advancement of technology, quality and skills, accessibility to the market, the requirement of capital, etc. 

• Scheme of Fund for Regeneration of Traditional Industries

Known as SFURTI as well, this scheme is an initiative by the Ministry of MSME to organize the traditional artisans and industries of the country into clusters. The motive behind this is to encourage them with all sorts of support to make products of high quality and competitive for long-term sustainability goals. This scheme aims to create the required physical infrastructure, upgrade the existing technology, boost innovation, assist in marketing, and improve packaging so that traditional artisans' incomes can increase.

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