For quite some time now, the Indian Government has been focusing on the MSME sector. A lot of beneficial schemes have been designed for the SMEs and MSMEs. Unfortunately, a big part of the industry, still are not aware of the benefits that they can be availed. In this piece, we will help you in understanding the meaning of MSME, the registration procedure, the documents required and the benefits of it.
(A) What are MSMEs?
Micro, Small and Medium Enterprises (MSMEs) have been defined in accordance with the Micro, Small & Medium Enterprises Development (MSMED) Act, 2006. As per this Act, the Micro, Small and Medium Enterprises (MSME) are classified in two Classes:
1. Manufacturing Enterprises –
The enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the industries (Development and regulation) Act, 1951) or employing plant and machinery in the process of value addition to the final product having a distinct name or character or use. The Manufacturing Enterprise is defined in terms of investment in Plant & Machinery.
2. Service Enterprises-
The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment.
The limit for investment in plant and machinery / equipment for manufacturing / service enterprises, as notified,vide S.O. 1642(E) dtd.29-09-2006 are as under:
They are defined in term of investment in Plant and Machinery/ Equipment as below:
|Manufacturing Enterprises||Rs 25,00,000||Less than Rs. 50,00,000||Less than Rs. 100,000,000|
|Service Enterprises||Less than Rs 10,00,000||Less than Rs 20,000,000||Less than Rs 50,000,000|
(B) Registration Process under MSME Act
i) The registration process is completely online. However, if entities so desire, they can do it offline too.
ii) There are no registration fees required for this process
iii) Registration can also be done for more than one industry
Step by Step Registration Process:
(C) Documents Required for Registration
Very few and simple documents are required for MSME Registration in India, namely:
i) Address Proof of Business
For Self-owned premises – Letter of allotment, possession letter or property tax receipt. If there is a municipal license in the business name or in the name of the proprietor, partner or director of the business, no other possession document is required to be submitted.
For Rented premises – Rent Receipt, No Objection Certificate from the owner and any recent utility bill shall suffice.
ii) Charter Documents of the entity
|For Partnership Firm (Unregistered)||For Partnership Firm (Registered)||For Company|
|1. Partnership Deed||1. Partnership Deed|
1. Memorandum and Articles of Association
2. Certificate of Incorporation
3. copy of the resolution passed in general meeting
4. copy of board resolution authorizing a director to sign the MSME application
iii) Sale/Purchase Invoice Copies
Business is required to submit a copy of sale bill related to each end product that it will supply. Also, for each raw material that it will purchase, a purchase bill has to be submitted.
iv) Copy of Licenses and Bills of Machinery Purchased
In few cases, the applicant has to submit a copy of industrial license which is to be obtained by giving an application to Govt. of India. Further, all bills and receipts related to purchase and installation of plant and machinery have to be kept safe and required to be submitted on demand.
(D) Why should you register for MSME – Benefits of MSME Registration in India?
1.Collateral Free and Easy Bank Loans
Due to the MSME registration, the bank loans become cheaper as the interest rate is very low around 1 to 1.5%.
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.
2. Easier to obtain licenses and approvals
It has made very easy for enterprises that are having MSME Certificate to obtain Licenses, approvals and registrations on any field for their business from the respective authorities as they can produce the Certificate of MSME Registration while making application.
3. Special consideration in International Trade Fairs
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.
4. Octroi & Excise Benefits
The scheme of refund of octroi provided under the Package Scheme of Incentives, 1993 will be included in the new Scheme up to 31-3-2006 on the same pattern. Where account-based cess or other levy is charged instead of or in lieu of octroi, such change will also be eligible for refund as in the case of octroi.
Enterprises that have MSME Registration can enjoy Excise Exemption in the initial year of business, as mentioned in the Excise Exemption scheme by Government and depending on business activity.
5. Waiver of Stamp Duty and Registration Fees
At present, IT units in public IT Parks are exempted from stamp Duty and Registration fees upto 31st March 2006. Now all new industrial units having MSME Registration and expansions will be exempted from payment of Stamp Duty and Registration fees.
6. MAT benefits
MSME registered units are allowed to credit for minimum alternate tax (MAT) to be carried forward for up to 15 years instead of 10 years.
7. IPS Subsidy
Enterprises that have MSME Registration are eligible for Industrial Promotion Subsidy (IPS) as mentioned in the scheme.
8. Counter Guarantee from Government of India through CGSTI
Enterprises that have MSME Registration are eligible for Counter Guarantee from Government of India through CGSTI.
9.Protection against delay in payment
The Ministry of Micro, Small and Medium Enterprises gives protection to MSME Registered Business against delay in payments from Buyers and right of interest on delayed payment through conciliation and arbitration and settlement of dispute be done in minimum time. If any micro or small enterprise that has MSME registration, supplies any goods or services, then the buyer is required to make payment on or before the date agreed upon between the buyer and the micro or small enterprise. In case there is no payment date on the agreement, then the buyer is required to make payment within fifteen days of acceptance of good or services. Further, in any case, a payment due to a micro or small enterprise cannot exceed forty-five days from the day of acceptance or the day of deemed acceptance. In case of failure by the buyer to make payment on time, the buyer is required to pay compound interest with monthly interest rests to the supplier on that amount from the agreed date of payment or fifteen days of acceptance of goods or service. The penal interest chargeable for delayed payment to a MSME enterprise is three times of the bank rate notified by the Reserve Bank of India.
10. Reduced bank interest rates
i) The rate of Interest for enterprise that has MSME registration are lower as compare to other enterprises. Certain targets are set for banks’ lending to the Micro and Small Enterprises. The banks’ have to achieve a 20% growth in credit to micro and small enterprises and 10% annual growth in the number of micro enterprises accounts and 60% of total lending to Micro and Small Enterprises sector. The banks have to follow the following:
ii) 40% of the total advances must go to micro and small enterprises involved 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.
iii) 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 lakh
iv) To simplify, 60% of the advances must go to micro enterprises.
11. 15% CLSS subsidy
The Ministry of Micro, Small and Medium Enterprises is operating a scheme namely “Credit Linked CGSTI Subsidy Scheme (CLCSS) for technology upgradation of Micro and Small Enterprises. The scheme was launched in October-2000 and revised from 29.9.2005. The revised scheme aims at facilitating technology upgradation of Micro and Small Enterprises (MSEs) by providing 15% capital subsidy (limited to maximum Rs.15 lakhs) for purchase of Plant & Machinery. Maximum limit of eligible loan for calculation of subsidy under the scheme is Rs.100 lakhs. Presently, more than 1500 well established/improved technologies under 51 sub-sectors have been approved under the Scheme.
12. Waiver in Security Deposits to Governments
The Ministry of Micro, Small and Medium Enterprises gives following benefits to enterprises that has MSME Registration while making application for Government Tenders:
i) Issue of tender sets free of cost
ii) Exemption from payment of Earnest Money
iii) Waiver of Security Deposit upto the Monetary Limit for which at the unit is registered
13. 50% subsidy for Patent Registration
Enterprises that have MSME Registration Certificate can avail 50% 50% subsidy for patent registration by making application to respective authority.
14. 1% exemption on OD Interest Rates
Enterprises that have MSME Registration can avail benefit of 1% exemption on interest rate on OD as mentioned in the scheme.
Announcements in Budget 2019:
GST registered MSMEs can get 2% interest subvention from Government for incremental loans of Rs 1 crores under the MSME Credit Scheme.
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