India is a nation of cultural diversity and rich heritage imputed to the abounding villages and rural areas, few of them being well-known and popular even worldwide. In recent times, ‘ethnic’ India has presented a new face before the global market because of their eco-friendly and multicultural features and sectors like khadi, handicrafts, coir, etc. have made their presence felt time and again. The contribution of these sectors to the Gross Domestic Product (GDP) of the country is significant enough to rightly state that these rural and small-scale industries, whether based on agriculture or service-oriented or otherwise, are the potential key drivers of the Indian economy.
MSME Classification
Earlier, organisations like sole proprietorships, partnership firms, one person companies, etc with a limited capital investment, employing less than ten workers would typically be named as ‘small scale industries’ and would usually operate as ancillary units. These industries have unfolded as a booming and impressive sector of the Indian economy, making it imperative to identify them as a distinguished field. This led to the introduction of the Micro, Small and Medium Enterprises Development Act in 2006 by the Central Government to facilitate the promotion and development and enhance the competitiveness of such enterprises.
As per Section 2(e) of the Act, an enterprise is defined as ‘an industrial undertaking or a business concern or any other establishment, by whatever name called, engaged in manufacturing or production of goods in any manner pertaining to any industry specified in the First Schedule to Industrial Development and Regulation Act, 1951 or engaged in providing or rendering service or services”.
With effect from 1st July 2020, an enterprise shall be –
- A micro-enterprise, if the investment in plant and machinery or equipment is below Rupees One Crore and the annual turnover is below Rupees Five Crore or
- A small enterprise, if the investment in plant and machinery or equipment is below Rupees Ten Crore and the annual turnover is below Rupees Fifty Crore, or
- A medium enterprise, if the investment in plant and machinery or equipment is below Rupees Fifty Crore and the annual turnover is below Rupees Two Hundred and Fifty Crore.
This is a new composite method for both manufacturing and service industries where exports are not included in the annual turnover, thereby reducing the fear of losing the benefits and status of MSME under this Act.
An enterprise shall neither be called as MSME nor be governed by the Ministry of MSME under the Act, if it does not meet the aforementioned criteria.
MSME Registration Process
The registration process for MSME is entirely online and is called UDYAM Registration. It is quick and simple and is carried out through the government’s official portal. Although it is not mandatory for MSMEs to obtain a registration, it is always recommended that they enjoy the benefits under the MSMED Act, 2006 and other schemes.
Before the registration process, it is important to note:
- This registration is absolutely free of cost.
- There is only one official website for UDYAM registration provided by the Government of India.
- Minimal documentation – This process works on a self-certification basis and no proof documents are required to file an application. Only Aadhaar and PAN are mandatory and the official and GST- linked details are automatically fetched from the government databases.
- Single Registration – One business can have only one Udyam Registration. This is irrespective of the number of activities, whether manufacturing or services, it undertakes or provides.
- No Expiry – The Udyog Aadhaar is valid for an unlimited and unrestricted period of time and has no expiry date for its registration.
Here is a step-by-step guide for the online registration process for an MSME –
Step 1: Visit the official government portal
Go to the Udyam Registration website: https://udyamregistration.gov.in
Step 2: Select the type of Registration
There are two categories for registration and one has to be selected according to the type and status of the applicant.
(i) For new enterprises not registered yet with UDYAM – Click on ‘For new enterprises who are not registered yet at MSME’ option.
(ii) For existing enterprises having registration – Click on ‘For those enterprises who are registered as UAM or those enterprises having registration through assisted filing’ option.
Step 3: Enter your Aadhaar Number
Enter the twelve digit Aadhaar Number of the applicant that is, proprietor or partner or director, and name as per the Aadhaar number.
Validate the Aadhaar number using OTP received on the registered mobile number linked to Aadhaar.
Step 4: Fill out the application form
Provide the details requested such as name, type of enterprise, PAN, location of the enterprise, etc.
Then enter the official address, bank account details and business activities like manufacturing or services and lastly, fill out the personal details and enterprise details in the form.
Step 5: Give the information related to the investment and turnover
Provide with the details of investment in plant and machinery or equipment and the annual turnover of the enterprise applying for registration. These details will help to classify the said enterprise as micro, small or medium.
Step 6: Validate and submit
Review all the information entered carefully and revise the details inserted if there are any changes to be made. Accept the declaration by checking the box as displayed on the screen. Once reviewed and verified, click on the ‘Submit and get the final OTP’ button.
Enter the OTP received on your registered mobile number and click on the ‘Final Submit’ button to complete the process and submit the final application for registration.
Step 7: UDYAM Registration Certificate
After successful submission of the application, a Udyam Registration Number (URN) will be generated and the certificate can be downloaded from the portal once the verification is complete by entering your registered mobile number linked to Aadhaar, then OTP, and finally logging in to print and download the certificate.
The status of your application can also be checked online on the Udyam Registration portal with the help of the reference number generated while filling the application form.
In case of loss of registration number, the same can be retrieved online through the same government portal by clicking on ‘Forgot Udyam Registration Number’ option and providing the one time password received on the registered mobile number or email.
Why is it important for an enterprise to obtain an MSME registration?
As mentioned earlier, it is not at all compulsory for an enterprise to get itself registered. Still, it is always beneficial for them to obtain the same as it avails them of a wide array of advantages along with the status of MSME under the Act, 2006. Amongst the many merits, some are pointed out below:
- Manufacturing or services – There is now no difference between a manufacturer and a service provider so as to classify them as MSME under the Act. ‘One business, one registration’ is the motto followed, irrespective of the number of activities undertaken or services rendered.
- Tax subsidies – MSMEs are exempted from direct taxations and a number of subsidies are also granted on the procurement of goods and raw materials, while the rates of indirect taxes are also subsidised for them.
- Lower interest rates – The interest rates applicable to them are much lower in comparison to those approved by the Reserve Bank of India for the banks to lend finances to other companies. MSMEs can avail loans from banks to finance their businesses at a rate lower than the market.
- Priority sector – MSMEs get priority access over others to loan facilities from banks due to their status as MSME
- Official recognition – A registered MSME is officially and legally recognised in the government records and this helps them to gain easy access to the e-tenders of the Government of India.
- Rebates, refunds, concessions, relaxations, grants, and reimbursements are allowed to facilitate their ease of funding and smooth business operation. They enjoy more tax credit benefits, lessening their tax burden.
- MSMEs are given special consideration in exports.
- Access to Schemes – A number of schemes have been introduced and launched for MSMEs such as the Prime Minister Employment Generation Programme (PMEGP), Prime Minister Rozgar Yojana (PMRY), Rural Employment Generation Programme (REGP), Market Promotion and Development Assistance (MPDA), etc.
Conclusion
The concept of micro, small and medium enterprises aims to not only provide financial support, enhance competitiveness and promote technological upgradation but also to improve the total economic output of the country. Overall, they are a vital part of the socio-economic fabric of the society, steering innovation and rural entrepreneurship into a balanced regional development.
The MSME registration process is designed as a straightforward and user friendly process to facilitate the ease of doing business for entrepreneurs. By simplifying the Udyam procedure, the Central Government encourages more and more businesses to formalise and contribute to India’s total economic growth and development.
Bibliography
- www.msme.gov.in
- Micro, Small and Medium Enterprises Development Act, 2006
- Udyam Registration portal: www.udyamregistration.gov.in
- www.nabard.org
