Following the announcement by Finance Minister Smt. Nirmala Sitaraman on May 13, 2020, regarding the government’s measures for businesses in the MSME sector, the question of what is MSME, how to get registered under MSME, and what benefits a business can reap from udyam registration has become a hot topic of discussion. As a result, we’ve attempted to address these concerns here in the best interests of our users.
MSME stands for Micro, Small, and Medium Enterprises.
MICRO (Hindi: ‘Suksham’), Small (Hindi: “Laghu”), and Medium (Hindi: “Madhyam”) Enterprises are the terms used to describe them.
There is a distinct Ministry that is responsible for MSMEs. In addition, the Micro Small and Medium Enterprises Act of 2006 is in place to help MSMEs.
MSMEs cover the following industries:
Manufacturers and Service Providers are the only ones who may register. Traders and wholesalers are excluded from coverage.
Any type of business, whether it is a sole proprietorship, a partnership firm, an LLP, or a corporation, is eligible to register. When it comes to the formation of businesses, there is no prejudice.
The following are the requirements for registration as an MSMEs:
If we consider the situation prior to the announcement, the criteria for eligibility were based solely on investments made in plant and machinery (in the case of manufacturing enterprises) or equipment (in the case of service-provider enterprises), and there were separate investment limits for the manufacturing and service sectors. Now, following the amendment as announced,The definition of MSMEs has undergone two major modifications.
- Separate Investment Limits are no longer in effect. As a result, from now on, single settings will apply to both sectors.
- In addition to the Investment Limits, Turnover Limits must be examined in order to determine eligibility.
Documents Required for MSME Registration:
- Authorized Person’s Aadhar Card (I.e. Proprietor, Any Partner, Any Director)
- Authorized Person’s Social Category
- Business Names and Business Types
- The Enterprises’ PAN
- Business’s Registered Address
- Plants’ Location
- Commencement Date
- Bank Account Information
- Number of People Employed
- Plant and Machinery/Equipment Investments and Turnover Information (Note: The cost of plant and machinery should be used instead of the depreciation value.)
- Code for Classification of Industries in the United States (NIC Code)
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The following are the main advantages of MSME registration:
1. Payments-related sense of security:
Sections 15 and 16 of the MSME Act, 2006, contain a major beneficial provision that states that if a business covered by MSME sells its product or provides services to a buyer, the buyer must pay within 45 days of the date of acceptance of the goods or services, and if the buyer does not pay within the aforesaid aforesaid aforesaid aforesaid aforesaid aforesaid aforesaid Furthermore if the payment situation worsens, MSME registered businesses can turn to the legal route with greater certainty.
2. Finance Is Easily Accessible:
Prior to the announcement, the government-aided MSMEs by instructing banks to provide loans to MSMEs with some rate of interest or collateral security requirements relaxed up to a limit of Rs. 2 crores, based on the criteria established by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). So that MSME firms may start and grow their operations without having to deal with the complexity of procedural issues.
However, MSMEs should not be seen in a broad sense, implying that just because a company is classified as a small business does not mean it is automatically eligible for bank financing. This is not the case. The bank will look at the CIBIL score, the business’s accounts, balance sheets, income tax returns, GST returns, and other statutory filings, as well as the regularity with which they are filed. Aside from that, banks will want projections for a three- to five-year period. All of these tasks must be completed.
3. Patent/Trade Mark Registration Subsidy
Enterprises that have received a certificate of registration from MSME are also eligible for a subsidy. By submitting an application to the appropriate ministry, this subsidy can be obtained for patent/trademark registration.
4. Lower Electricity Costs
MSMEs are therefore entitled to a lower power rate than non-MSME registered businesses, resulting in lower costs and greater profit.