Importance and Benefits of MSME

In this blog, I have tried to summarise aspects of MSME in terms of understanding its challenges, its benefits, and how to grow the business.

As we already know MSME stands for the micro, small and medium enterprises. It was introduced by the Government of India (GOI) in agreement with the Micro Small Medium Enterprises Development Act of 2006. As per this Act, MSMEs are enterprises involved in the production, processing, and preservation of goods and commodities. Recently, the GOI redefined MSMEs in terms of their level of investment and turnover, so that more and more companies can avail of maximum benefits from the government schemes, subsidies, and SOPs. MSMEs are the backbone of any developing economy and it covers only the manufacturing and service industries. Currently, the total registered MSMEs are 51 million. Registering the enterprise as MSME is optional, but a registered one gets lots of benefits from government schemes like bank loans (collateral free) subsidy on patent registration, industrial promotion subsidy, protection against delayed payments, etc.

In this blog, I have tried to summarise aspects of MSME in terms of understanding its challenges, its benefits, and how to grow the business. These are some Frequently Asked Questions to enable readers to take maximum benefit out of them.

BENEFITS OF MSME

The Benefits of being Registered and Part of MSME growth story are immense and will give a first mover advantage.

The Benefits can be classified as both Tangible & Non-Tangible, Fund Based and Non-Fund based.

So first & foremost you get your Basics under control

• • Proof of Legal Existence.

• • Marketing support/ Assistance (Bar Code) e g. Assistance will be provided for Participation in exhibition within India for Stall rent etc. Assistance in creating Bar code.

• • Reimbursement of Certification/ Accreditation fees for ISO etc. With a Vision to encourage domestic products to be globally competitive and to promote quality certification to obtain ISI/WHO-GMP & ISO.

• • Subsidy on Patent Registration

• • Credit Rating Support

• • Concession in Electric Bills

• • Preference in Government Tenders

• • International Push

• • Protection Against Delayed Payments

These are just a few examples of level of support MSME gets on getting registered.

Though the major benefits of being Registered as MSME’s are fund based. And since my vision is Ethical business practice and in an Interest free environment, I will not go into much detail on fund based benefits, as you will find lot of material on fund based financing on the other hand, Interest free financial products (Sharia Compliant Products) are flexible and are also compliant with all applicable Indian laws though in its infancy stage, but its formation is with the vision of fulfilling the requirements of our Ethical MSME’s enterprises for providing them Interest (Riba) free financing.

But still, we need to know what the Government is providing us in terms of fund Based financing.

Fund-Based

• • Credit Facilities through Banks with Low Interest rate

• • Term Loans for Fixed Assets

• • Working Capital Requirement

• • Exemption of Interest

• • Overdraft Facilities

• • Priority Sector Lending

Non-Fund Based

• • Guarantees

• • Letter of Credit

• • Foreign Bank Guarantees

• • Foreign Letter of Credit

It’s the Government’s intentions to lift the Spirit of MSME’s as it is the backbone of the economy. Government has initiated various programmed for the growth of MSME Sector.

• • To Create E-Market linkage for MSME’s to act as replacements for Trade fair and Exhibition. E.G GeM

• • Technology DRIVEN SYSTEM TO ENHANCE TRANSACTIONS BASED LENDING USING DATA FROM E-MARKET PLACE

• • Government will continuously monitor settlement of dues to MSME Vendors from Government and Central PSU’s

MSME And Frequently Asked Questions

1 – Is MSME registration updated to Udyam Registration?

Yes, MSME registration, i.e. Udyog Aadhaar Registration has been replaced with Udyam Registration. If any micro, small and medium industries want to start any business, they can obtain the MSME/Udyam Registration. The MSME/Udyam registration is completely online. This registration provides the business with a lot of benefits and subsidies.

2 – Is the MSME registration compulsory?

No. The enterprises that come under the MSME category need not mandatorily apply for MSME registration. However, it is better to obtain MSME/Udyam registration as the government provides a lot of benefits in terms of loan facilities, easy access to credit, low-interest rates, eligibility to many schemes, etc., to the enterprises that have MSME registration.

3 – Is Aadhar card compulsory?

Yes. For obtaining Udyam registration, an Aadhaar card is compulsory. In case an applicant is other than the proprietor, the Aadhaar card of the partner and the director will be required.

4 – Can the existing and new businesses both apply?

Yes, an existing and new business can apply for MSME/Udyam Registration, provided the existing unit is functioning and meets the threshold limits for registration. Enterprises having a UAM Registration need to be re-registered for Udyam registration to avail the benefits provided for the MSMEs.

5 – What is the validity of the MSME registration certificate?

There is no expiry of the Udyam Registration Certificate. As long as the entity is ethical and financially healthy there will be no expiry of the certificate.

6 – Can trading companies register under MSME?

Yes. Earlier, the MSME registration covered only manufacturing and service industries. Trading companies are not covered by the scheme. However, in July 2021, the government announced that the wholesale and retail trade will come under the MSME classification and thus can apply for MSME registration of their wholesale/retail business. The Ministry of Micro, Small and Medium Enterprises decided to include retail and wholesale trade under MSMEs for the purpose of priority sector lending.

7 – Do I need multiple registrations for manufacturing plants in different cities?

No. The MSME/Udyam Registration Certificate is for a single entity irrespective of multiple branches or plants. However, information about multiple branches or plants must be furnished.

8- Whose Aadhaar number is required to be entered when filling the MSME registration?

In the case of a company, its authorised signatory should provide the PAN and Aadhaar number while filling the MSME registration.

9 – Whose Aadhaar number should be entered in case a partnership firm applies for MSME registration?

The Aadhaar number and PAN number of the proprietor is to be entered in the case of a proprietorship firm. In the case of a partnership firm, the managing partner of the firm should provide the PAN and Aadhaar number. The enterprise details on the MSME registration form will be the details of the partnership firm and the details of the entrepreneur will be the details of the managing partner in case of a partnership firm.

10 – After registering one MSME, can I register a second MSME?

When the enterprises are different, i.e. established under different names and registered or incorporated separately, then the proprietor of the enterprise can apply for MSME registration.  However, an enterprise cannot file for more than one Udyam Registration. All the activities including manufacturing or service should be specified or added in one Udyam Registration. An entrepreneur can add additional activities in the Udyam Registration by clicking on the ‘Update Details’ option on the homepage.

11 – Can a builder having a project of more than Rs.500 crore and status of business value is more than Rs.250 crore can register for MSME registration?

No. The criteria to apply for Udyam registration depends on the annual turnover of the services provided. Since the annual business value or turnover of the builder is more than Rs.250 crore, the builder cannot apply for MSME registration as the annual turnover of an enterprise must be less than Rs.250 to apply for medium enterprise registration.

12 – Who is eligible to apply for MSME registration?

MSME registration can be obtained by the following entities that fulfil the revised MSME classification criteria of annual turnover and investment:

• Individuals, start-ups, business owners and entrepreneurs

• Private and public limited companies

• Sole proprietorship

• Partnership firm

• Limited Liability Partnerships (LLPs)

• Self Help Groups (SHGs)

• Co-operative societies

• Trusts