♣ Support measures for Micro, Small & Medium Enterprises are contained in the 2 Acts and notifications issued:
‘The Industries (Development & Regulation) Act, 1951’
‘The Micro, Small and Medium Enterprises Development Act, 2006’
Need for MSME division
- Under Industries (Development & Regulation) Act, manufacturing licence will be given only after “full and complete investigation”
- It regulates all aspects such as type of goods, production capacity
- Because of many Government controls & regulations it has become difficult to set up an industry by all. Only large scale units were able to set up
- Small scale units were way behind
Need for MSME classification
Why favourable treatment to SSI Units
- Small Scale Industries play a major role in:
– Avoiding the monopoly of the big industries
– Distribution of resources and wealth to all in the Society
– Easing the unemployment problem
- The said Section 11B enables the Government to have the following for the viability of small scale industries:
– Supportive Measures
– Favorable treatment
Importance of SSI Units
- From time to time various supportive measures are announced by the Government through Department of Industrial Policy and Promotion under Ministry of
- However there was neither separate Act nor separate ministry for the small units.
MSME Act, 2006
- For the first time a comprehensive separate central act was enacted on 16-06-2006 for providing various support measures for small units.
- A separate ministry called “Ministry of Micro, Small and Medium Enterprises” was set up.
- Execution agency is Development Commissioner MSME
Classification of Enterprises Sec7(1)
- Ownership type of Enterprises: Any
- Nature of Business : Manufacturing & Services
» Trading Enterprises are excluded
- Type of goods allowed: Goods specified in 1st Schedule to Industries (Development & Regulation) Act, 1951
- Type of services allowed: Any
- Sec 7(1) specifies maximum investment limits under which Government can notify the criteria.
- Ministry of Small Scale Industries notified the limits vide Gazette Notification No.S.O.1642(E) dated 29-09-2006.
- This was superseded by Gazette Notification No.S.O.1702(E) dated 01-06-2020 issued by Ministry of Micro, Small and Medium Enterpsies
INVESTMENT LIMITS IN MSME
|Maximum Limits as per Act
|Notified limits from 16-06-06 to 30-06-20
INVESTMENT & TURNOVER CRITERIA w.e.f 01-07-2020
- e.f 01-07-2020 there are no separate limits for manufacturing and services.
- New criteria of e., Turnover added.
- Now unit has to comply both investment and turnover
Rs. in Crores
|Notified limits w.e.f 01-07-2020
- Notification: S.O.1702(E) dated 1st June 2020
How to calculate investment in P&M
- Explanation2 to Section 7 of MSMED Act specifies following to be excluded while calculating the investment in case of Service Enterprise:
– Pollution Control
– Research & Development
– Industrial Safety Devices
- Plant & Machinery is neither defined under the MSMED Act nor The Industries (Development & Regulation)
- Following are not part of P&M:
– Land & Buildings
– Furniture & Fixtures
– Office Equipment etc
- Exclusions — Manufacturing enterprise
(Notification No.S.O.1722(E) dated 05-10-2006 read with Explanation 2 to Sec 7 of MSMED Act):
– Equipment such as tools, jigs, dyes, moulds and spare parts for maintenance and the cost of consumables stores;
– Installation cost of plant and machinery;
– Research and development equipment and pollution control equipment
– Power generation set and extra transformer installed by the enterprise as per regulations of the State Electricity Board;
Exclusions for Manufacturing Enterprises:
- Bank charges and service charges paid to the National Small Industries Corporation or the State Small Industries Corporation;
- Procurement or installation of cables, wiring, bus bars, electrical control panels (not mounded on individual machines), oil circuit breakers or miniature circuit breakers which are necessarily to be used for providing electrical power to the plant and machinery or for safety measures;
- Gas producers plants
To be excluded:
- Transportation charges (excluding sales-tax or value added tax and excise duty) for indigenous machinery from the place of the manufacture to the site of the enterprise;
- Charges paid for technical know-how for erection of plant and machinery;
- Such storage tanks which store raw material and finished produces and are not linked with the manufacturing process; and
- Fire fighting equipment
- Original Price of P&M should be taken even when 2nd hand machinery was purchased
- Imported machinery includes following cost:
– Import duty (excluding miscellaneous expenses such as transportation from the port to the site of the factory, demurrage paid at the port);
– Shipping charges;
– Customs clearance charges; and
– Sales tax or value added
How to calculate turnover limit
- Turnover is not defined so far
- Press release dated 03-6-2020:
– Export turnover is excluded
How to register as MSME
- Completely online (it will take less than 5 minutes)
- To be registered after commencing of the enterprise
- Adhar linked with phone number is required. In case not available approach DIC
- National Industries Classification (NIC) codes are to be selected
- One person can register any number of units
- Following activities are excluded from registering with Udyog Adhar (Office memorandum No.UAM/MC/01/2017-SME dt.27-06-2017):
– Forestry & Logging
– Fishing & Aqua culture
– Wholesale and Retail Trade
– Domestic help such as cook etc
– Household production for own use such as cloth and farming
– Activities of extraterritorial bodies such as UN, IMF
– Certain activities of Crop, animal production in Division 01 of NIC
Benefits to MSME
Benefits to MSME Exclusive Right to Manufacture
- Micro and Small enterprises (not medium enterprises) have got exclusive right to manufacture certain type of goods. (Sec 7)
- Sec 29B of I(D&R) Act: List of items exclusively reserved are notified first in 1967.
- This list contains 47 items and enlarged to 504 by 1978. As per NIC Codes (National Industrial Classification Codes) this list expanded to 863.
- First in 1997 the items were de-reserved vide Notification No.S.O.298(E) issued by Ministry of Industry.
- In the later years 16 notifications were issued over 18 years and last notification S.O.998(E) was issued on 10-04-2015 de-reserving the last 20 items in the list.
- As on date there is no exclusive right to manufacture for MSME.
Benefits to MSME Payment of dues to MSME (Chapter V of MSMED Act)
- Interest is payable if dues not paid within the stipulated period.
- Interest rate 3 times of bank rate notified by RBI. (Bank Rate 4.25% w.e.f 22-05-2020)
- Interest is to be calculated monthly compounded.
- Dispute may be referred to Micro and Small Enterprises Facilitation Council which may pass appropriate order.
- Buyer to deposit 75% if he goes to court against the order
Benefits to MSME Disclosure requirements of unpaid dues to MSME
- Disclosures in annual audited statement of accounts (audit may be under any law)
- Principal & interest payable at the year end
- Principal & interest paid during the year in case of delayed payments
- Interest payable but not paid
- Interest paid to MSME for delayed payments is not allowable as expenditure under I.T. Act (Sec 23 of MSMED Act)
TReDS Trade Receivables Discount Scheme
TReDS is an electronic platform for discounting the bills issued by MSME since 2014
ZED Zero Defect Zero Effect
- To improve the quality of the products manufactured by MSME
- ZED certification at 5 levels
- ZED certification benefits:
– Internal Benefits (improvement of quality etc)
– Benefits by Banks (concession in interest rate etc)
– Benefits by State Government (reimbursement of certain expenses etc)
CGTMSE Credit Guarantee Trust for Micro and Small Enterprise
- This scheme not available for Medium Enterprises
- Under this scheme loans upto Rs.2.00 crores can be obtained without collateral security from financial institutions
- Useful for the young entrepreneurs who have good business idea but no collateral security
NCGTC National Credit Guarnatee Trustee Company
- Established in 2004
- Gives guarantee to Rs.3.00 Lacs Crore loans under ECLGS (Emergency Credit Line Gurantee Scheme) for MSME under Atmnirbhar Bharath
– Credit Gurantee for education loans
– Credit Guarantee for factoring
– Credit Guarantee for Skill Development
– Credit Guarantee for Standup India Loans
– Credit Guarantee for Micro Units
CLCS Credit Linked Capital Subsidy
- This scheme is for technology upgradation of MSME
- Upfront capital subsidy of 15% (maximum of Rs.15 lacs) for improvement of technology
- Available in relation to 51 products
- Subsidy to be applied through banks only.
- Existing scheme closed on 31-3-2020
MSE – CDP Cluster Development Program
- This scheme is for technology upgradation of MSME
- Central Government give grants for following:
– Setting up of common facility centers
– Infrastructure Development Projects
– Marketing Hubs / Exhibition Centers by Associations
– Thematic Interventions
– Support to State Innovative Cluster Development Program
ESDP Up-scaled Entrepreneurship and Skill Development Program
- Industrial Motivation Campaigns (IMCs)
- Entrepreneurship Awareness Programmers (EAPs)
- Entrepreneurship-cum-Skill Development Programme (E-SDP)
- Management Development Programmes (MDPs)
SIDBI Small Industries Development Bank of India
- Direct Finance
- Guarantee Schemes
NABARD National Bank for Agriculture and Rural Development
- Various schemes and support measures rural industries in agriculture and allied activities
- Web based Grievance redressal and advice program
- Launched on 01-06-2020
- One website giving links to many schemes of MSME
- This website is launched as part of ease of doing business
- https://my.msme.gov.in/MyMsme/Reg/Home. aspx
MSME Data Bank
- Central PSU and Large Units procure certain goods and services from MSME registered in MSME Data Bank
- Registration is completely online and it is free
Atmnirbhar Bharath Abhiyan
- Many measures were announced.
- Brief details are available at:
- Some of the important schemes for MSME discussed hereafter
1. Additional 20% Loan
- This loan is for existing borrowers.
- 20% of the balance outstanding as on 29-02- 2020.
- Tenure 4 years – 1 Yr repayment holiday for principal
- This loan is available to units:
– Having less than Rs.25.00 crores limits
– Turnover up to Rs.100.00 crores
– Account should not be NPA
- The loan will be guaranteed by Central Government.
- No Guarantee fee
- No need to provide any additional collateral security.
- Scheme is open upto 31-10-2020 or sanction of Rs.3.00 Lac Crores which ever is earlier
2. Loans to promoters of NPA accounts
- This loan will be given to promoters of NPA or stressed units.
- In turn promoters infuse that amount as equity in the units.
- These loans will be partially guaranteed by CGTMSE to an extent of 25%.
- Liquidity Rs.20,000 crore (subordinate debt)
3. Purchase of 15% equity
- Government will invest upto 15% of the equity of good MSME units maximum of Rs.75.00 Lacs
- Rating will be given to MSME units based on the turnover, exports, profits and gst payments.
- Govt. will setup up a fund with Rs.10,000cr.
- It will become easier for the units to raise equity from capital markets Rs.40,000cr. (1:4 criteria)
- Total liquidity Rs.50,000cr (Fund of funds)
4. No global tenders upto Rs.200Cr.
- This rule is applicable for all Central Government projects.
- Foreign companies are not allowed to participate in the projects worth upto Rs.200Cr.
- General Financial Rules will be amended accordingly.
5. e-market linkage
- Fairs and Exhibitions may not happen in the near future.
- As an alternative e-market linkage for MSME units will be promoted.
- Based on the sales in the e-market, banks will lend.
6. EPF support for 3 more months
- 12% of employer and 12% of employee total 24% of small business will be paid by the Government.
- Earlier this benefit is given for 3 months i.e., March, April & May 2020.
- Now this benefit will be extended for another 3 months June, July & August 2020.
- Conditions: Total employees less than 100 and 90% employees salary less than Rs.15000/-
- Liquidity Relief Rs.2,500Cr
7. EPF 10% for others
- EPF contribution rate reduced from 12% to 10% each for both employer and employee.
- This benefit will be available for next 3 months.
- Conditions: This benefit is available for units other than those enjoying 24% benefit.
- 12% also can be paid
8. Relief to contractors
- Government contractors are allowed 6 more months to complete all types of works.
- Bank Guarantees will be released stage wise.
9. Real Estate RERA 6 months time
- All real estate projects registered under RERA have to complete within the prescribed time frame
- Now this time frame extended by 6 months for all registered projects expiring on or after 25-03-2020.
- Another 3 months can be extended
10. 25% reduction in TDS/TCS rates
- TDS/TCS rates decreased by 25%
- from 14-05-2020 to 31-3-2021.
- This reduction is not applicable for TDS on salaries.
11. For fisheries/aqua
- Validity of Sanitary Import Permits (SIP) for import of Shrimp Broodstock extended by 3 months.
- 1 month delay allowed in arrival of broodstock.
- No additional charges for rebooking cancelled quarantine cubicles.
- Renewal of hatcheries extended by 3 months.
12. Micro Food Enterprises
- Helps micro food enterprises to attain FSSAI food standards, build brands and marketing
- Cluster based approach
- Will help these units to export their produce.
- Existing micro food enterprises, farmer producer organisations, self help groups and co-operatives will be benefited.
- Rs.10,000 crore scheme will be lunched.
13. Operation Greens
- “Operation Greens” covers presently 3 crops i.e., Onion, Tomatoes & Potatoes.
- Now the scheme will be extended to all fruits & vegetables.
- Scheme features:
– 50% subsidy on transportation
– 50% subsidy on storage including cold storage
- Maximum assistance to one unit Rs.50Cr
Measures by AP State Government
- AP State Government announced relief measures for business located in the state of Andhra Pradesh.
01. Measures by AP
- Release of 904.48Cr incentives to MSME units in 2 months period.
- These incentives are pending from 2014-15.
- Waiver of Fixed Demand Electricity Charges for MSME units for 3 months from April 2020 to June 2020
- For Large and Mega units postponement of Fixed Demand Electricity Charges of April to June 2020 for 3 months without interest.
02. Working Capital Loans
- New loans will be given to MSME units ranging from Rs.2.00 lacs to Rs.10.00 lacs.
- Interest rate 6 to 8%
- Processing fee 0.25%
- Repayable in 3 years including 6 months moratorium
03. Preference for MSME
25% of Government purchase should be from MSME units with 4% reservation to SC/ST units and 3% women owned MSME units.
04. Preference for MSME
- AP Government this package as ReSTART Program
- Time limit to apply for these benefits is 30-06- 2020.
- Website : www.apindustries.gov.in/incentives.
- AP Government is planning 11 digits adhar number for every industry to know the location and nature of industry.
- Concessional rate of stamp duty for loan agreements
- Investment subsidy schemes by State Govts
- Many other benefits are being extended by various Governments, Government agencies and banks.
KVIC Khadi & Village Industries Commission Act, 1956
For tiny and cottage industries in rural area: Definitions:
- Village Industry any industry located in a rural area producing goods or renders service in which per head investment of an artisan or worker does not exceed Rs. 1.00 Lakhs in plain area and Rs. 1.5 Lakhs in Hilly Area
- KHADI……..a fabric that breaths “Warm in Winter, Cool in Summer” Khadi is a handspun and hand woven cloth which acquired patriotic status during Indian freedom struggle and it gave a “SWADESHI SPIRIT”.
- 344 Sample project reports of various industries available at:
- https://www.kviconline.gov.in/pmegp/pmegpweb/docs/jsp/n ewprojectReports.jsp
- Schemes of KVIC
– PMEGP (Prime Minister Employment Generation Program)
– SFURTI (Scheme of Fund for Regeneration of Traditional Industries)
– ISEC (Interest Subsidy Eligibility Certificate)
– MPDA (Market Promotion Development Assistance)
– Bee Keeping – The Honey Mission