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MSME Registration

 

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MSME registration is not yet made mandatory by the Government but it is beneficial to get one’s business registered under this because it provides a lot of benefits in terms of taxation, setting up the business, credit facilities, loans, etc. The MSME Development Act became operational on October 02, 2006. It was established to promote, facilitate and develop the competitiveness of the micro, small and medium enterprises.


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    What is MSME Registration?

    In India, MSME was introduced in the year 2006. Actually, there are still some service sector that was not yet included in this sector was included in the definition of the Micro, Small and Medium-sized Enterprises making a historic change to this Act. Hence, leveraging the scope of the sector even now the government simplified the MSME Registration online with paperless work.

    The benefits of MSME registration include priority sector lending, power tariff subsidies, capital investment subsidies, and excise and direct tax exemptions. Following are the conditions that need to be fulfilled to qualify under the MSME Development Act.

    • All the manufacturing enterprises which have invested less than 10 crores in machinery and plant are allowed to be registered as MSME.
    • In service enterprises, the investment in plant and machinery should not be more than 5 crores.
    • And in near future, if your enterprise exceeds the maximum limit, then it will not sum up as MSME.

    MSMEs are classified into two categories:

    i. Manufacturing enterprise; and

    ii. Service enterprise.

    They are defined in term of investment in Plant and Machinery/ Equipment  as below

    MICROSMALLMEDIUM
    Manufacturing EnterprisesLess than Rs 25 lakhLess than Rs 5 croreLess than Rs 10 crore
    Service EnterprisesLess than Rs 10 lakhLess than Rs 2 croreLess than Rs 5 crore

    What Are The Different Types of MSMEs?

    There are 3 types of MSMEs: Micro, Small, and Medium enterprises. Under the Aatmanirbhar Bharat Abhiyan (ABA), the government revised the MSME classification by inserting composite criteria of both investment and annual turnover. Also, the distinction between the manufacturing and the services sectors under the MSME definition has been removed. This removal will create parity between the sectors. The following is the revised MSME classification for the different types of MSMEs, where both the investment and annual turnover are to be considered for deciding an MSME:

     

    CRITERIAMICROSMALLMEDIUM
    Investment & Annual Turnover< Rs.1 crore & < Rs.5 crore< Rs.10 crore & < Rs.50 crore
    < Rs.50 crore & < Rs.250 crore

    Procedure for MSME Registration

    FirstFiling can help you get your MSME Registration at your convenience!

    Our team of professionals can get it done for you!

    Documents Required for MSME Registration

    Business Address Proof:

    If the premise is self-owned– Allotment letter, possession letter, lease deed or property tax receipt. If there is a municipal license in the business name or in the name of the proprietor, partner or director of the business, no other possession document is required to be submitted.

    If the premise is rented– Rent receipt and a no objection certificate from the landlord is required. Also, any utility bill or document evidencing the landlord’s ownership is to be submitted.

    Copies of Sale Bill and Purchase Bill:

    Business is required to submit a copy of sale bill related to each end product that it will supply. Also, for each raw material that it will purchase, a purchase bill has to be submitted.

    Partnership Deed/ MoA and AoA

    If the business is a partnership firm, it has to submit its partnership deed. If the partnership firm is registered, it has to submit registration certificate also.

    In case of a company, a copy of Memorandum of Association and Articles of Association, and certificate of incorporation has to be submitted. With it, a copy of the resolution passed in general meeting, and the copy of board resolution authorizing a director to sign the MSME application is also to be submitted.

    Copy of Licenses and Bills of Machinery Purchased

    In few cases, the applicant has to submit a copy of industrial license which is to be obtained by giving an application to Govt. of India. Further, all bills and receipts related to purchase and installation of plant and machinery have to be kept safe and required to be submitted on demand.

    Pricing

    (All inclusive)

    Frequently Asked Questions

    It is advisable to get a Provisional SSI Registration Certificate (PRC) before starting your operation in your enterprise. The PRC will work smoothly for you and will help you out with particular NOCs and clearances from regulatory bodies.
    The validation of a PRC is for 5 years and if the unit is still not under operational then you may still re-apply for it. As soon as you start with your operations, you can easily apply for the Permanent License.
    MSMEs are recognised by all the institutions and banks. Special schemes are drafted to recognise them as well. Banks prefer MSMEs instead of normal enterprises to lend loans. The possibility of getting a sanctioned loan is much higher in a case of MSME. Bank loan interest rates will also be lower. There may also be preferential treatment in case of delay in repayment.
    Many state government prefers enterprises which are registered under MSMED Act. Subsidy such as on power, taxes, and much more is offered by state governments. In most of the states, sales tax exemption is provided purchase preferences is given on goods produced. The enterprise may also relish excise exemption scheme and exemption from certain direct taxes in the initial years of your business.
    While computing the value of Plant and Machinery, only original value is asked to be taken into account as per the MSME notification.

    Certain trust such as Credit Guarantee Fund Trust has been set up by Ministry of MSME, Government of India and SIDBI, so that there won’t be any breakage in the flow of credit to the MSE sector without any interference from the third party. The scheme is solidified on the basis that the lender should give importance to project viability and secure the credit facility purely on the primary security of the assets financed.Cluster based approach to lending is intended to provide a full-service approach to cater to the diverse needs of the MSE sector which may be achieved through extending banking services to recognised MSE clusters.

    The banks have, therefore, been advised to treat it as a thrust area and increasingly adopt the same for SME financing. Banks are always asked to take appropriate steps so that the flow of credit is smoothly done to the identified clusters of micro and small entrepreneurs from the Minorities Communities residing in the minority concentrated districts of the country.

    The CGTMSE would provide cover for credit facility up to Rs. 100 lakh which have been extended by lending institutions without any collateral security. A nominal annual fee is charged by the CGTMSE to avail of the guarantee cover.

    Credit rating is an estimate to figure out the capability of an enterprise to meet all the financial needs based on the previous year dealings. Although credit rating is not compulsive but it is in the interest of the MSE borrowers to get their credit rating done as it would help in credit pricing of the loans taken by them from banks.

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