Small and Medium Businesses have been very integral to the growth of the Indian Economy. They contribute 30% of India’s total GDP and 40% of India’s Exports. They employ more than 11 crore people!
In this article we will tell you everything you must know about an MSME Registration, right from definitions to advantages to eligibility criteria.
You can contact us here if you want to apply for an MSME Registration
What does the word MSME stand for?
You’ve read it at a lot of places. You’ve seen many articles with the word. So what does MSME really stand for?
MSME stands for Micro, Small and Medium Enterprises. Its a way to classify the SME Sector which are building blocks of the Indian Economy.
The Indian Government constantly tries to encourage and support MSME’s by floating various schemes which helps MSME’s in a lot of ways. This further inspires everyone, especially the youth, to explore their entrepreneurial side and start their own venture. There are a lot of benefits you get when you enroll or register your Startup/Venture as an MSME! It is very important to note that to avail the benefits of MSME it is compulsory to register as an MSME.
Now, Let’s understand what kind of companies/startups are eligible for an MSME Registration
- To be eligible to take an MSME registration you have to either be a manufacturer or a service provider or both. Pure traders cannot apply for an MSME registration.
- All kinds of entities can register as an MSME. Proprietorships, Partnership Firms, LLPs, Private Limited Companies and even Limited Companies are eligible for an MSME Registration.
- MSME’s are further classified as Micro, Small and Medium Enterprises for the registration.
Below is the classification criteria for MSMEs:
|*Investment < Rs.1 cr AND Turnover < Rs.5 cr||*Investment < Rs.10 cr AND Turnover < Rs.50 cr||*Investment < Rs.50 cr AND Turnover < Rs.250 cr|
*The word “Investment” in the above table means “Investment in Plant and Machinery”
Process of registration:
- MSME registration is now popularly known as Udyam (earlier known as Udyog Aadhar) wherein the Government has interlinked the information collected by the Income Tax, GST and MSME authorities.
- For the registration, you have to fill a single paperless form that is available at the website – https://udyamregistartion.gov.in.
- For registration, you must have an Aadhar number of :
-An individual in the case of proprietorship
-Aadhar of Karta in the case of HUF
-Aadhar of the partner in the case of Partnership firm
-Aadhar of the authorized signatory in the case of company/LLP
- Once the details are filled and uploaded you will be instantly issued a registration number and a Certificate.
- Once registered as an MSME, unlike GST and Other registrations, you do not have to do ANY Compliance ever!
Advantages/Benefits of an MSME Registration
1. Protection against delay in payment
This is one of the biggest advantage of an MSME Registration! Payment protection. When you as an MSME, sell goods or services to any buyer, the buyer has to make you the payment within 45 days. If the buyer fails to pay within days the prescribed time limit, he has to pay monthly compound interest at 3 times of the bank rate (Almost @ 16%)
If you don’t get paid within 45 days you can file a complaint on the Government’s website to recover your money. The government ensures you get your payment and generally takes action on complaints within 90 days–
Website to file a Complaint: – https://samadhaan.msme.gov.in/
2. 50% Discount in Government Fees in Trademarks and Patents
Generally, the government fee for Trademarks is Rs 9000/- But, if you are registered as an MSME, you get a 50% Discount in these fees which makes it Rs 4500/-. Same is the case with Patents as well!
3. Collateral free Loan
Generally, for taking a Loan, you need to provide a Collateral Security (Like your Home, Office etc.) . But, if you are an MSME, this condition is waived off for you and you can avail a Loan upto Rs. 2 crores without providing any collateral Security. TBH, although this scheme is present, it’s on ground implementation is a little faulty as not a lot of MSME’s get these Loans from Banks. However, we have seen cases where entrepreneurs get Rs 10-15 lacs but not 2crores.
4. Low Interest rate on loan
Businesses or enterprises after obtaining MSME registration certificate can avail a reduction of 1% on an Overdraft loan. So, for example, if you have a Bank Loan @ 12% from a Bank, being an MSME, you can get a 1% concession on that Loan which would make the rate to 11%.
5. Reimbursement of certification fees for acquiring ISO standards
An MSME is eligible for reimbursement of expenses incurred to get themselves ISO certified to the extent of 75% of the expenditure, subject to a maximum of Rs.75,000/-
6. Preference in Government Tenders
This is one of the recent benefits for MSME’s. The Government has now announced that government tenders less than 200 crores will be exclusively open only to the MSME’s to bid for. This is a welcome move by the government which will in turn help the MSME’s gain more business in the Government sector.
7. Invoice Discounting- TReds
The present government has started a system called TreDs. Once this platform is active, MSME’s won’t have to wait for long days to get payments. Once goods or services are supplied to corporates by MSMEs, the invoice will have to be uploaded on the Treds portal. The customer will be then notified to approve this invoices
Once approved, this invoice will go to Banks/Financial Institutions who will then discount the invoice and make the payment instantly to the MSME.
So instead of waiting for say 30 days, you will get your payment in a single day. This will help in reducing the working capital requirements of MSMEs and will help in increasing their business.
To read more about TreDs: https://m.rbi.org.in/scripts/FAQView.aspx?Id=132
8. Other Advantages
The Government actually advertises more than 40 benefits of an MSME registration but to be honest with you, many of them are redundant and the on ground implementation of many schemes is faulty. We want to be completely transparent and honest with you and hence we have covered only the ones which make sense.
You can read about all the advantages here https://msme.gov.in/sites/default/files/MSME_Schemes_English_0.pdf
Note: The government keeps on migrating links and sometimes the above links may have faulty redirects.
The government is providing a large number of benefits to MSMEs for their promotion and growth by giving them financial support in the initial years. With the promotion of “Make In India”, the Government will give more importance to MSME for foreseeable future.
If you ask us our honest opinion on whether you should take an MSME registration or no, the answer is a Simple YES. There are no disadvantages, no compliance requirements of an MSME registration but there are many advantages. So, it makes complete sense to go for an MSME registration if you are eligible.
You could comment on this article if you have any doubts you’d like to ask us!