MSME, which stands for Micro, Small, and Medium Enterprises, serves as the supporting structure of the Indian economy. It provides the necessary resilience to our economy against global adversities. Currently, MSMEs in India have a contribution of 6.11% and 33.4% in the manufacturing GDP and manufacturing output respectively. They also employ 120 mn individuals in India, contributing around 45% of total exports from India.
Becoming a part of the MSME sector in India requires MSME registration. Irrespective of whether a company falls into the manufacturing or service sector, they need to get MSME registration done as defined in the MSME act.
MSME registration provides several benefits to the companies in terms of taxation, credit facilities to scale the business up. Let us dig deeper to find out more about MSME registration in India.
Definition of Micro, Small, and Medium Enterprises
A crucial part of MSME registration is defining the scale of a business in terms of investments made in it. The earlier classification of MSME was based on the amount invested in machinery/equipment or plant. Thus, the definition of a Micro, Small, and Medium Enterprise can be summarised in the following table:
|Sector||Based on Investment Criterion|
|Manufacturing||Up to Rs. 25 Lakhs||Up to Rs. 5 crores||Up to Rs. 10 crores|
|Services||Up to Rs. 10 Lakhs||Up to Rs. 2 crores||Up to Rs. 5 crores|
These low investment criteria often serve as an obstacle for growth, making the demand for revision of MSME classification increase over time. Keeping the related concerns in mind, the Government revised the classification criteria under Aatmanirbhar Bharat Abhiyan. The classification now covers both annual turnover and investment and there is no distinction between the manufacturing and service sector.
The revised classification that is considered for MSME registration is defined as follows:
|Classification Criteria||Annual Turnover||Investment|
|Micro||Less than Rs. 5 crores||Less than Rs. 1 crore|
|Small||Less than Rs. 50 crores||Less than Rs. 10 crores|
|Medium||Less than Rs. 250 crores||Less than Rs. 50 crores|
What is MSME Registration Process?
Companies need to get the MSME registration done online using the portal udyam registration.gov.in. Their registration is done under two broad categories, which are:
- MSME registration for entrepreneurs who are not yet registered
- Registration for those who have already done MSME registration as EM-II or UAM (Udyog Aadhar Memorandum)
Let us cover each of these MSME registration categories in detail.
New MSME Registration for Entrepreneurs
One can simply visit https://udyamregistration.gov.in/ to register an MSME. This can be done using the Aadhar card number, with or without a PAN card.
The steps for MSME registration with a PAN card are as follows:
- Click “For New Entrepreneurs who are not Registered yet as MSME” button given on the portal.
- Enter your name and Aadhar number as asked on the MSME registration page.
- Generate and validate OTP.
- If you already have a PAN card, the portal fetches the details from the government database, while you need to fill in ITR details.
- Validate PAN and then fill in the details of your plant or industry.
- Once you have entered all the details, you need to submit them up to get a final OTP.
- Post this step, MSME registration gets completed and you will get a reference number. The verification of MSME registration may take a few days, after which you will receive the Udyam Registration Certificate.
For MSME Registration without a PAN card, most of the steps to be followed are the same as above, except that you need to select ‘No’ as the option for the question – ‘Do you have a PAN?’ You then need to proceed with filling in the other details – industry and personal to complete the process.
Keep in mind that you need to update PAN and GSTIN on the portal to avoid Udyam registration suspension.
MSME Registration for Those Who Already Have EM-II or UAM
If you are already registered as EM-II or UAM, visit https://udyamregistration.gov.in/ to click ‘For those having registration as EM-II or UAM’ button. Then, enter your Udyog Aadhar number in the next step and generate/verify OTP. This will complete the MSME registration process.
What are the Benefits of MSME Registration?
- MSME registration makes it easier for individuals to avail bank loans at interest rates that are comparatively lower than regular loans.
- It also enables the allowed credit for MAT (Minimum Alternate Tax) to be carried forward for fifteen years (10 years otherwise)
- Post MSME registration, the total cost of product patent or setting up an industry goes down because of several concessions and rebates.
- It helps acquire government tenders easily.
What are the Documents Required for MSME Registration?
The business entity has to submit several documents which are required for MSME registration. These include:
- Business address proof
- Purchase bill and sales bill copies
- Partnership deed/Memorandum of Association/Articles of Association
- Copies of bills and licenses of machinery bought for use
List of MSME Schemes Launched by the Government
|Grievance Monitoring Scheme||Beneficial to get the complaints of business owners addressed timely|
|Technology and Quality Upgradation Scheme||Aimed to help MSMEs to use Energy Efficient Technologies (EETs) to lower down production cost|
|Credit Linked Capital Subsidy Scheme||Provides capital subsidy to the business owners to upgrade old, obsolete technology with the newer one|
|Incubation||Aimed to cater to innovators in implementing their new product, design, or ideas by providing financial assistance|
MSME Registration FAQs
Who is eligible for MSME Registration?
Any type of business entity, be it proprietorships, partnership firms, private or public limited companies, Limited Liability Partnerships (LLP), or trusts, are eligible for MSME registration.
What is MSME Registration?
It refers to the process of registering a business entity to avail of various benefits defined for MSMEs in India. You can get the MSME registration done online by following the steps given above.
What is MSME Registration Fee?
There is no fee or cost involved in applying for MSME registration online in India. You should also know that this registration is not made mandatory for all business entities. However, it is highly beneficial to get it done timely.
Which companies fall under the purview of MSMEs?
The Government of India introduced the term ‘MSME’ in agreement with MSME Development Act, 2006. It covers enterprises that are primarily engaged in the manufacturing, processing, and preservation of various goods and commodities. The MSME definition is also defined in terms of annual turnover and investment.
What are the limits for MSME?
The limits of an MSME are defined in terms of annual turnover and investment as defined above.
Is It Mandatory for All MSMEs to have GST?
As a registered entity, each MSME working in the format of partnership, company, or proprietorship, must comply with GST laws and hence, apply for a GST number.
Is there any Difference Between SME and MSME?
SMEs or Small and Medium Enterprises cover independently owned and operated business entities that are designed for profit. As per the revised SME definition, they now comprise both service and manufacturing enterprises. On the other hand, MSMEs are defined based on their investment amount and turnover value.
Paytm – Ensuring Digital Evolution for MSMEs in India
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Disclaimer: The information shared in this blog is based on the findings and research done by the author. Reader’s discretion is advisable while consuming the information shared above.