Micro, small, and medium enterprises (MSMEs) are an essential part of the economy of a developing country like India. These industries are also labelled small-scale industries (SSIs). MSME registration ensures these businesses can avail benefits specially accorded to MSMEs by the Government of India.
As per the MSME Act, a company can acquire MSME registration irrespective of whether it is in the manufacturing or service industry. Although the Government of India has not made MSME registration mandatory yet, registering your business under this scheme accords numerous benefits in terms of taxes, setting up your business, loans, credit facilities, and more.
The MSME Act became operational in the year 2006. The objective of the act is to help, promote, and enhance the competitiveness of India’s micro, small, and medium-sized businesses.
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MSME registration process
The procedure for MSME registration is available online on Udyam registration, which is the official government website used to register MSME online. MSMEs can register in the portal under the following two categories.
For new and upcoming entrepreneurs not registered as MSME or those with Entrepreneurs Memorandum-II (EM-II)
For MSME registration, new entrepreneurs and entrepreneurs with EM-II registration must click the ‘For New Entrepreneurs who are not Registered yet as MSME or those with EM-II’ button on the home page. To sign up for a new account, you need to enter your Aadhaar and PAN credentials.
When you click the ‘For New Entrepreneurs not Registered as MSME or those with EM-II’ button on the home page, the registration page asks for the entrepreneur’s Aadhaar number and name. When these details have been entered, click on the ‘Validate and Generate OTP Button.’ You will now receive an OTP, which will open the PAN Verification page.
The business owner must enter the ‘Type of Organization’ and the PAN, then click the ‘Validate PAN’ button. The portal gets the entrepreneur’s PAN from government databases and checks that it is correct.
After the PAN is verified, the Udyam Registration form appears. Entrepreneurs should fill in their information and information about their business.
After completing the MSME registration form, click ‘Submit and Get Final OTP’. When the MSME online registration process is completed, a message will appear giving a reference number. Note the number for future correspondences. Once verified, the Udyam Registration Certificate is issued.
Registration for entrepreneurs already having Udyog Aadhaar Memorandum (UAM)
People already having registered as UAM should click the button ‘For those having registration as UAM’ or ‘For those already having registration as UAM through Assisted filing’ on the homepage of the government portal. On clicking this button, a page will open for entering the Udyog Aadhaar Number, and the OTP option can be selected.
The portal allows you to receive OTP on the phone number or the email address. After selecting the OTP options, click ‘Validate and Generate OTP’. After entering the OTP, complete the MSME registration form with registration information and complete the Udyam registration.
Documents required for MSME registration
MSME registration includes the Aadhaar Card and PAN Card. The registration does not require proof of documents. Details linking PAN and GST on investment and turnover of enterprises are obtained automatically from Government databases. GSTIN and Income Tax Systems are integrated with the portal.
According to the GST law, paying GST for enterprises not requiring a GST registration is not compulsory. However, enterprises that require GST registration under the GST act have to register for Udyam Registration.
By clicking on the ‘For New Entrepreneurs not registered as MSME or those with EM-II’, enterprises with UAM registrations or any other registrations issued by any of the authorities under the Ministry of MSME have to re-register on the Udyam Registration Portal.
According to the provisions of the law, by 30/06/2022, enterprises with UAM registrations should migrate to Udyam Registration. If entrepreneurs with UAM registration do not migrate to Udyam Registration by the aforementioned date, then the UAM registration will be invalid, and they will be ineligible for the benefits provided to MSMEs.
Eligibility Criteria for applying for MSME Registration
An MSME registration or Udyog Aadhaar is only available to entities classified as micro, small, or medium enterprises under the following criteria:
In the case of entities that are engaged in manufacturing or production of goods:
Microenterprise:
Any entity in which the investment in plant and machinery is less than Rs. 25 lakhs
Small enterprise:
Any entity in which the investment in plant and machinery is less than five crores but more than 25 lakhs.
Medium enterprise:
Any entity in which the investment in plant and machinery is less than Rs. 10 crores but more than Rs. 5 crores.
In the case of entities that provide or render services:
Microenterprise:
Any entity with equipment investment is less than Rs. 10 lakhs.
Small enterprise:
Any entity in which the investment in equipment is less than Rs. 2 crores but more than Rs. 10 lakhs.
Medium enterprise:
Any entity where the investment in equipment is less than Rs. 5 crores but more than Rs. 2 crores.
Benefits of MSME registration
The benefits of MSME registration are as follows:
- The MSME Registration makes bank loans cheaper because the interest rates are meagre, between 1% and 1.5%. Interest on regular loans is a lot lower than that.
- The Minimum Alternative Tax (MAT) credit can be carried forward for up to 15 years instead of 10.
- Registration reduces the cost of getting a patent or setting up a business because rebates and discounts are available.
- The Udyam Registration Portal is linked to the Government e-Marketplace and several other State Government portals, ensuring easy access to their markets and e-tendering.
- MSME on-paid amounts are subject to a one-time settlement fee.
- As a result of the Udyam Registration, MSMEs can take advantage of government programmes such as the Credit Guarantee Scheme, the Credit-Linked Capital Subsidy Scheme, the Public Procurement Policy, and protection against late payments.
- Small- and medium-sized businesses can obtain loans from banks in the priority sector.
- MSMEs can participate in e-tenders with a government security deposit waiver.
- Several activities can be listed on one registration, regardless of whether they are service-oriented or manufacturing-oriented activities.
- Payment for barcode registration
- Plan to avoid paying direct taxes
- ISO certification fees reimbursement
- Reduced electricity bills
- Special consideration is given to international fairs and conventions
Conclusion
MSMEs are a vital cog in the economies of developing countries. They provide employment opportunities to the weakest and poorest strata of society and enable them to escape perpetual poverty. MSMEs provide large-scale employment with low investments and have a prominent position in the economy as the second-largest employer after agriculture. MSMEs contribute to the industrialisation of rural and backward areas and reduce regional imbalances and ensure an equitable distribution of national income and wealth.
FAQs
Is Udyam Registration the same as MSME Registration?
Yes, Udyam Registration has replaced MSME Registration, also known as Udyog Aadhaar Registration.
Do you need an Aadhar card?
Yes, you must have an Aadhaar card to sign up for Udyam. If the applicant is not the owner, the Partner and the Director's Aadhaar cards are required.
Does the MSME registration certificate have an expiry?
The Udyam Registration Certificate does not have an end date, and the certificate is valid till the entity is ethical and financially stable.
Can you register for a second MSME after already registering for one MSME?
The proprietor can apply for MSME registration when the businesses are separate, with distinct names and individual registrations or incorporations. However, an entity cannot fill out more than one Udyam Registration form. All activities, like manufacturing or providing services, should be listed or added to one Udyam registration.
