Micro, Small, and Medium Enterprises (MSMEs) are business entities categorized based on size and investment. According to the MSME Development Act, the definition of MSMEs encompasses various factors, including investment in plant and machinery or equipment, turnover, and employment.
Who Can Apply for MSME Registration?
MSME registration is open to all Micro, Small, and Medium Enterprises (MSMEs). Individuals are not eligible to apply for MSME registration. MSME registration is available to any proprietorship, partnership business, corporation, trust, or society with an investment of less than Rs.50 crore and annual revenue of less than Rs.250 crore.
In a developing country like India, MSMEs are the backbone of the economy. As MSME industries grow, our country’s economy as a whole also grows and flourishes. The other names for MSME industries are small-scale industries or Small and Medium Enterprises (SMEs). The MSME became operational on October 02, 2006.
Our government has established the Ministry of MSME to provide impetus for MSMEs by promoting, facilitating, and developing their competitive spirit. Thankfully, MSMEs enable citizens of a nation to venture out on their own and give back to society by creating new jobs and diversifying an area’s gross domestic product (GDP). They have also slowly and steadily revived the artisan class in the far reaches of India by providing employment and access to loans, as well as other essential services. Furthermore, MSMEs constantly support the upgradation of technology and infrastructure development, triggering the modernization of the country in general and our society in particular.
In terms of numbers, MSMEs contribute a staggering 30% to our country’s GDP, around 45% of the manufacturing output, and approximately 48% of the country’s exports.
It is due to this very fact that they are so crucial to our economic development, and the reason why they have constantly been in the news ever since the COVID-19 pandemic struck in early 2020. However, as the pandemic subsides and the economy slowly returns to normal, it presents a greater opportunity for business owners to obtain their MSME registration and consequently avail themselves of a wide array of benefits.
Eligible Categories for MSME
The eligible categories for MSME registration include proprietorships, Hindu undivided families, partnership firms, one-person companies, limited liability partnerships, private limited companies, limited liability companies, producer companies, associations, cooperative societies, and any other undertaking.
Industry-Specific Eligibility for MSME
In addition to the general eligibility criteria based on investment and turnover, there are specific industry-specific considerations for MSME registration. These considerations may vary depending on the nature of the business and the sector in which it operates. Here are some examples of industry-specific eligibility factors for MSMEs:
- Manufacturing Sector:
- Compliance with specific quality standards or certifications required for certain industries (e.g., ISO certification for food processing units).
- Adherence to environmental and safety regulations applicable to manufacturing operations.
- Research and development (R&D) activities should be included as part of the investment criteria for high-tech manufacturing sectors.
- Service Sector:
- Qualifications, certifications, or licenses required for specific service-oriented industries (e.g., professional services, IT services, healthcare services).
- Compliance with sector-specific regulations, such as those governing financial services, legal services, or healthcare practices.
- Consideration of the specific nature of service offerings, such as creative industries, tourism, hospitality, or consultancy services.
Documents Required for MSME Registration
The only documents required for the MSME registration process are an Aadhaar card and a PAN card. Currently, the process of MSME registration is entirely online, and no proof of documents is required. This is because the PAN and GST-linked details on investment and turnover of enterprises that aspire to register will be pooled automatically by the Udyam Registration Portal from the corresponding government databases.
Step-by-Step Registration Process for MSME
The process for MSME registration in India is relatively simple and can be completed online through the Udyam Registration portal. Here are the steps to follow for MSME registration:
- Go to the Udyam Registration portal at https://udyamregistration.gov.in/ and create an account using your Aadhaar number.
- Fill in the necessary details about your business, such as its name, address, type of organization, and bank details.
- Provide information about the investments made in plant and machinery or equipment for the manufacturing or service enterprise.
- Upload the required documents, including an Aadhaar card, PAN card, and bank statement.
- Verify the information provided and apply.
- Once the application is submitted, an acknowledgment with a unique registration number will be generated.
- The registration certificate with the Udyam Registration Number will be issued after the application has been verified.
It is important to note that there is no fee for MSME registration. The process is entirely free of charge. Additionally, businesses already registered under the previous Udyog Aadhaar Memorandum (UAM) do not need to re-register under the new Udyam Registration portal.
If you face any difficulties during the registration process or need assistance, you can seek the help of professional service providers like Kanakkupillai. Their team of experts can help you with the entire process of MSME registration, from filling out the application to the verification and issuance of the certificate, ensuring a hassle-free experience for you.
Classification of MSME
The existing MSME classification was based on the investment criteria in plant and machinery or equipment. Therefore, to enjoy the MSME benefits, the MSMEs must limit their investment to a lower limit, as specified in Table 1.
Table 1. Existing MSME classification
| Sectors | Criteria | Micro | Small | Medium |
| Manufacturing | Investment | <₹25 lakhs | <₹5 crores | <₹10 crores |
| Services | Investment | <₹10 lakhs | <₹2 crores | <₹5 crores |
However, under the Aatmanirbhar Bharat Abhiyan (ABA), the Government of India has revised the MSME classification by including composite investment and annual turnover criteria. Further, the distinction between the manufacturing and the services sectors under the MSME definition was eliminated. Table 2 contains the current revised MSME classification; however, it is pertinent to note here that both the investment and annual turnover are to be considered when deciding on an MSME.
Table 2. Revised MSME classification
| Criteria | Micro | Small | Medium |
| Investment and annual turnover | <₹1 crore and <₹5 crores | <₹10 crores and <₹50 crores | <₹50 crores and <₹250 crores |
Previously, the MSME registration process covered only manufacturing and service industries. However, in July 2021, the Government of India announced that wholesale and retail trade would also fall under the MSME classification, allowing businesses in these sectors to apply for MSME registration, excluding motor vehicles and motorcycles. Thus, the manufacturing and service industries, as well as wholesale and retail trade, are also covered under this revised classification. Hence, such industries can also apply for the MSME registration process.
The MSME’s online registration must be done on the government portal, udyamregistration.gov.in. Further, registration of the MSMEs can be done under the following two categories available in the portal:
- The first category is for new entrepreneurs who are not registered yet as MSMEs or those with an Entrepreneur Memorandum Part II (EM-II) and
- The second category is for those registering as Udyog Aadhaar Memoranda (UAM) and those already registered as UAM via assisted filing.
The new entrepreneurs and those with EM-II registration need to click the button “For New Entrepreneurs who are not Registered yet as MSME or those with EM-II” shown on the home page for registering as MSME. New registration of MSME is carried out by entering the Aadhaar card and PAN numbers.
When you click the button on the government portal’s homepage, it opens the registration page accordingly. It asks the entrepreneur to enter their Aadhaar number and name. After entering these details, the “Validate and Generate OTP (one-time password)” button will be clicked. The PAN verification page opens once this button is clicked and the OTP is received and entered.
However, the entrepreneur must enter the “Type of Organization” and the PAN number and click the “Validate PAN” button. The portal obtains the PAN details from the government databases and validates the PAN number of the entrepreneur. After verification of the PAN, the Udyam Registration form will appear, and the entrepreneurs need to fill in their enterprise’s details.
Once the details on the MSME registration form are filled in, the “Submit and Get Final OTP” button will be clicked. After that, the MSME online registration process will be completed, and a successful registration message with a reference number will appear. This reference number should be noted for future use. After verification of the MSME registration form, which may take a few days, the competent authority issues the Udyam Registration Certificate.
For entrepreneurs who already have registration as UAM, it is sufficient to click the button labeled “For those having registration as UAM” or “For those already having registration as UAM through Assisted filing” on the government portal’s home page. This will direct the entrepreneur to a new page where the Udyog Aadhaar Number must be entered, and the entrepreneur should then select the OTP option.
The options are to obtain an OTP via mobile, as specified in UAM, or via email, as defined in UAM. After choosing the OTP Options, “Validate and Generate OTP” will be clicked. After entering the OTP, registration details will be filled in on the MSME registration form, and thus, the Udyam registration will be complete.
It is pertinent to indicate seven benefits of registering as an MSME in our country.
Benefits of MSME Registration
- Bank loans (collateral-free)
- Subsidy on patent registration
- Overdraft interest rate exemption
- Industrial promotion subsidy eligibility
- Protection against payments (delayed payments)
- Fewer electricity bills
- ISO certification charges reimbursement
1. Bank loans (collateral-free)
The Government of India has specified that collateral-free credit is applicable to all small and micro-enterprises. This initiative by our government ensures that funds are allocated to both micro- and small-scale enterprises. Under this scheme, the previously registered and the new enterprises can avail themselves of the benefits. The Credit Guarantee Trust Fund Scheme was introduced by the Government of India, not single-handedly, but in consultation and collaboration with the Small Industries Development Bank of India and the Ministry of Micro, Small and Medium Enterprises (MSME).
2. Subsidy on patent registration
Under the existing legislation, MSMEs duly registered with the ministry are eligible for a 50% subsidy on their patent registration fees. This incentive motivates small businesses and firms to sustain innovation and handle new projects and technologies. Any MSME can avail of this subsidy by applying to the respective ministry.
3. Overdraft interest rate exemption
MSMEs are entitled to a benefit of 1% on an overdraft of their business; however, the procedural details of the scheme usually vary from bank to bank. This option ensures the safety of small businesses, particularly during unfavorable market conditions or recessions.
4. Industrial promotion subsidy eligibility
Businesses are also eligible for subsidies for industrial promotion provided by the Government of India once registered with the ministry as MSMEs.
5. Protection against payments (delayed payments)
Given the current volatile economic scenario, MSMEs constantly face the risk of delayed payments, negatively impacting their business.
Therefore, to bail out the MSMEs in such a scenario, the Supreme Court of India had made it compulsory that any buyer of goods or services from the registered MSMEs has to honor the payment either before the due date or within 15 days from the date at which the buyer had accepted the goods or services. In the event of a default, the buyer must pay penal interest on the payment due, as mandated by the Reserve Bank of India.
This will deter prospective buyers from delaying payment due to the MSME.
6. Fewer electricity bills
Based on their MSME Registration Certificate, all MSMEs are entitled to concessions on their electricity bill. This enables MSMEs to boost their production and accept more work orders without concern regarding capital expenditure on costs such as electricity and maintenance. A duly filled-in prescribed proforma and the certificate of registration are the two documents to be submitted by the MSME to the Department of Electricity.
7. ISO certification charges reimbursement
Any registered MSME can claim reimbursement of expenses to obtain an International Organization for Standards (ISO) certification. This motivates MSMEs to have their respective businesses certified by the ISO; obviously, ISO certification helps MSMEs expand their business abroad, particularly in terms of high-quality exports.
Conclusion
In India, any business or enterprise that falls under the category of micro, small, or medium-sized enterprises (MSMEs) can apply for MSME registration online. The eligibility criteria for MSME registration are based on the investment in plant and machinery or equipment for manufacturing or service enterprises. MSME registration provides several benefits to businesses, including easy access to credit, tax exemptions, and government subsidies.
To get your business registered under MSME, you can seek assistance from Kanakkupillai, a one-stop destination for all your business registration needs. With its team of expert professionals, Kanakkupillai offers a hassle-free MSME registration process that takes care of all the necessary documentation and compliance requirements.
So, if you want to register your business under MSME, contact Kanakkupillai today and give it the boost it deserves!
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