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What is MSME?

MSME is the acronym of micro, small, and medium enterprises. In today’s world, MSME is the foundation of any economy especially of a developing country like India. The MSMED Act was created by the Indian government to encourage and promote MSMEs through different subsidies, programmes, and incentives. Udyog Aadhar or MSME Registration is required to receive benefits under the MSME Development (MSMED) Act, 2006 from the Central or State Governments, as well as the Banking Sector.

The Government of India has provided the criteria vide notification which came into effect from 1st July 2020, for classification of MSME as –

  • Micro Enterprise – Where the investment in Plant and Machinery or Equipment does not exceed one crore rupees and turnover does not exceed five crore (5 Cr) rupees.
  • Small Enterprise – Where the investment in Plant and Machinery or Equipment does not exceed ten crore rupees and turnover does not exceed fifty crore (50 Cr) rupees.
  • Medium Enterprise – Where the investment in Plant and Machinery or Equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore (250 Cr) rupees.

MSMEs enable citizens of a nation to venture out on their own and in turn, give back to society by creating new jobs and diversifying an area’s gross domestic production (GDP). They have also slowly and steadily revived the artisan class in the far reaches of India by providing employment, and access to loans and other services to the said class. Furthermore, they constantly support the upgradation of technology, infrastructure development, and trigger the modernization of the country and our society as a whole. To avail benefits of government schemes it has to be registered, for MSMEs the government has introduced Udyam registration.

MSME Registration

The Udyam Registration or MSME Registration is nothing but a government registration that is provided along with a recognition certificate and a unique number. This registration is to certify micro or small or medium enterprises. The Udyog Aadhaar registration has been transformed to the Udyam registration since July 2020.

The form for registration is provided in the Udyam Registration portal, that is https://udyamregistration.gov.in . This registration is completely paperless and digital. The only required document for Udayam registration is a self - declaration and the Aadhaar of the proprietor or managing director or karta is required. There is no requirement of fee for filing Udayam Registration. However, if it is a company or a Limited Liability Partnership or a Cooperative Society or a Society or a Trust, the organisation or its authorised signatory shall provide its GSTIN and PAN along with its Aadhaar number.

After the completion of the registration, an e – certificate shall be issued. This Udayam Registration certificate will have a dynamic QR Code from which the details about the enterprise can be accessed. The Udayam online system is fully integrated with Income Tax and Goods and Service Tax Identification Number (GSTIN) systems; details on investment and turnover of enterprises are taken automatically from Government databases.


Benefits of Udyam Registration

The registration allows the enterprise to avail benefits provided by the government such as subsidies and exemption. There are certain other benefits to it, such as –

  • Bank Loans (Collateral Free)

The Government of India has made collateral-free credit available to all small and micro-business sectors. This initiative guarantees funds to micro and small sector enterprises. Under this scheme, both the old as well as the new enterprises can claim the benefits. A trust named The Credit Guarantee Trust Fund Scheme was introduced by the Government Of India, SIDBI(Small Industries Development Bank Of India) and the Ministry of Micro, Small and Medium Enterprise to make sure this scheme is implemented (Credit Guarantee Scheme) for all Micro and Small Enterprises.

  • Overdraft Interest Rate Exemption

Businesses and enterprises registered as MSMEs can avail a benefit of 1% on the OverDraft in a scheme that differs from bank to bank. This helps to make small businesses secure during unfavorable markets.

  • Protection against Payments (Delayed Payments)

MSMEs constantly face the risk of delayed payments which in turn disturbs their entire business. In order to protect registered companies, the Supreme Court has mandated that any buyer of goods or services from registered MSMEs is required to make the payment on or before the agreed date of payment or within 15 days from the day they had accepted the goods or services. If the buyer delays the payment for more than 45 days after accepting the products or services then the buyer has to pay interest on the amount that was agreed to be paid. The interest rate is three times the rate that is notified by the Reserve Bank of India.

  • Decreased Electricity Bills

All companies that have the MSME Registration Certificate are entitled to concessions on their electric bill. This enables businesses to boost production and take in more orders without worrying about capital expenditure on costs like electricity and maintenance. micro, small and medium enterprises can avail of the concession by providing an application to the department of electricity along with the certificate of registration.

  • ISO Certification Charges Reimbursement

Any registered micro, small and medium enterprise can claim reimbursement of the expenses that were made in order to obtain an ISO certification. This motivates entrepreneurs to get their respective businesses ISO certified which helps them to do business abroad in terms of high-quality exports.

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