What’s MSME?

MSME stands for Micro, Small and Medium Enterprises. In a developing country like India, MSME industries are the backbone of the economy.

In this article, I am sharing various points regarding MSME like its categories, registration types, procedure, documents required & benefits of MSME registration.

The MSME sector contributes to 45% of India’s Total Industrial Employment, 50% of India’s Total Exports and 95% of all industrial units of the country and more than 6000 types of products are manufactured in these industries (As per msme.gov.in). When these industries grow, the economy of the country grows as a whole and flourishes. These industries are also known as small-scale industries or SSI’s.

Even if the Company is in the manufacturing line or the service line, registrations for both these areas can be obtained through the MSME act. This 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 became operational on October 02, 2006. It was established to promote, facilitate and develop the competitiveness of the micro, small and medium enterprises.

 The recent move (February 7, 2018) of the Union Cabinet to change classification norms for MSMEs from investment in plant and machinery/equipment’ to ‘annual turnover’ is a big relief for the MSME sector.

For ALL Business Compliances:

  • MSME are classified into two categories manufacturing enterprise and service enterprise.
  • They are defined in term of investment in Plant and Machinery/ Equipment as below MICRO SMALL MEDIUM

1. Manufacturing Enterprises:

The enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the industries (Development and Regulation) Act, 1951) or employing plant and machinery in the process of value addition to the final product having a distinct name or character or use. The Manufacturing Enterprise is defined in terms of investment in Plant & Machinery.

2. Service Enterprises:

The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment.

The limit for investment in plant and machinery/equipment for manufacturing/service enterprises, as notified, vide S.O. 1642(E) dtd.29-09-2006 are as under

Manufacturing Sector
Enterprises Investment in plant & machinery
Micro Enterprises  Does not exceed twenty-five lakh rupees
Small Enterprises More than twenty-five lakh rupees but does not exceed five crore rupees
Medium Enterprises More than five crore rupees but does not exceed ten crore rupees

Service Sector
Enterprises Investment in equipments
 Micro Enterprises  Does not exceed ten lakh rupees:
 Small Enterprises More than ten lakh rupees but does not exceed two crore rupees
 Medium Enterprises More than two crore rupees but does not exceed five crore rupees

3. Registration Types:

There are basically two types of registration:

4. Provisional Registration:

Provisional registration is granted to the unit during its pre-investment period to enable it to take necessary steps to apply for financial credit, land or an industrial set, water, power or telephone connections, etc

5. Permanent /Final Registration:

A provisionally registered Industrial unit when is about to in production can apply for permanent registration. Apart from this, an existing industrial unit is also eligible to apply for permanent registration without opting for the provisional one.

6. Registration Process:

  • To do the registration the small and medium scale industry owner has to fill a single form which he can do online as well as offline.
  • If a person wants to do registration for more than one industry then also he/she can do individual registration.
  • To do the registration he/she has to fill a single form which is available at the website. This is listed below.
  • The document required for the registration is Personal Aadhar number, Industry name, Address, bank account details and some common information.
  • In this, the person can provide self-certified certificates. There is no registration fees required for this process. Once the detail-filled and upload you would be getting the registration number.

7. Benefits of MSME Registration:

  • Due to the MSME registration, the bank loans become cheaper as the interest rate is very low around 1 to 1.5%. Much lower than interest on regular loans.
  • Statutory support such as condition and the Interest on Delayed Payments Act.
  • There are various tax rebates offered to MSME.
  • It also allowed credit for minimum alternate tax (MAT) to be carried forward for up to 15 years instead of 10 years.
  • There are many government tenders which are only open to the MSME Industries.
  • They get easy access to credit.
  • Once registered the cost of getting a patent done, or the cost of setting up the industry reduces as many rebates and concessions are available.
  • Businesses registered under MSME are given higher preference for government license and certification.
  • There is a One Time Settlement Fee for non-paid amounts of MSME.

8. Documents Required for MSME Registration:

The entity has to submit various documents like business address proof, copies of purchase and sale bill, and licenses from regulatory bodies. Below are the documents to be submitted along with other documents required case to case:

9. 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.

10. 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.

11. 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.

12. 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.

In case you need any information or clarification, please feel free to write us on carkadvisory@gmail.com


Author Bio

Qualification: Graduate
Company: RAK Foundation India
Location: New Delhi, IN
Member Since: 07 Jun 2018 | Total Posts: 6
Rohit Kapoor (RK) being professional and having experience of more than 10 Years in the filed of Taxation, Management, Law, Accounts, Audits, NGOs, Marketing and Information Technology. Till date he is associated with many of the organisation and on the strategy & executive board of many Organis View Full Profile

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  1. Manzoor Ahmad Taray says:

    My registered company is also registered as B Class Contractor in my state PWD Department but as registered small scale service provider can i have preferential claim than class A civil contractor.

  2. Shiv says:

    Does false ceiling work comes under msme and if yes then in which category it comes

    Plz clarify my doubt as I want to register it on UAM

  3. Nikhil Zaveri says:

    will the cost of computers and office equipments be considered under the limit of 5 crores in case of a service related industries .

  4. wmah says:

    Dear Sir
    Can a 100% subsidiary of foreign company have an MSME unit? Is investment limit calculated at unit level or overall balance sheet level in case company has 4 units in 4 difference states?

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