MSME: The Unsung Hero

MSME is the term which is widely used by the Government of India during covid 19 in order to make Aatm Nirbar Bharat, a step towards promoting MAKE IN INDIA. MSME stands for Micro, Small & Medium Enterprise. It contributes 30-35% of India’s GDP and creates employment of around 114 million. Thus, it is regarded as the growth engine of our country.

As per the official estimates, there are about 63.05 million micro industries, 0.33 million small, and about 5,000 medium enterprises in the country. The state of Uttar Pradesh has the largest number of estimated MSMEs with a share of 14.20 percent of the total MSMEs in the country.

1.1 Who can be MSME

Definitions of Micro, Small & Medium Enterprises in accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified in two Classes:

A. 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.

B. Service Enterprises:- The enterprises engaged in providing or rendering of services. As per the ‘Atmanirbhar Bharat’ scheme announced and after further amendments:

> Classification of Micro, Small & Medium is based on Twin criteria of “Turnover” and “Investment in Plant & Machinery or Equipment”

> No Separate limit for Manufacturing and Service Enterprise

> New criteria is set to bring more enterprises under MSME definition

1.2 How to Register as MSME

MSME Registration is a 12-digit number issued by the Ministry of MSME. It can be applied physically as well as electronically. However, the process of registering MSME can be made at https://udyogaadhaar.gov.in/ instantly after providing few details.

List of documents required for online registration:

1. Aadhar Card- Proprietor/ Partner/ Director

2. PAN Card- Proprietor/ Partner/ Company

3. Name & Address of Firm/ Company

4. Date of Commencement of Business Product Details- Name of Product

6. Social Category- General/ SC/ ST/ OBC

7. Total number of Employees

8. Total Investment in Plant & Machinery or Equipment

9. Cancelled Cheque OR Bank Details i.e. IFSC code & Bank Account Number Email Id & Mobile Number

1.3 What are the benefits of Registration as MSME

MSME registration brings out a lot of benefits which can be in the nature of monetary as well as non- monetary.

I. Collateral Free Loans:

The Credit Guarantee Fund Scheme (CGS) for Micro and Small Enterprises was launched by the GOI to make available collateral-free credit to the micro and small enterprise sector. Both the existing and the new enterprises are eligible to be covered under the scheme. The Ministry of Micro, Small and Medium Enterprises, Government of India and Small Industries Development Bank of India (SIDBI), established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises.

II. Lower Interest:

MSME enjoys lower rate of interest of 1-1.5% as compared to other regular enterprises.

III. Interest Subvention:

RBI vide circular No. RBI/2018-19/125 dated 21^st February 2019 provided for 2% interest subvention for all GST registered MSMEs, on fresh or incremental loans. All working capital or term loan would be eligible for coverage to the extent of ₹1 00 lakh only during the period of the Scheme.

IV. Protection against Delayed Payments:

Micro and small enterprises are protected against delayed payment beyond 45 days of acceptance or deemed acceptance of goods or services. They are eligible for an interest upto 3 times of bank rate notified by the RBI in case of delayed payments.

Mandatory reporting in Tax Audit Report for disallowance of Interest on delayed payments.

In case of Company, Schedule III specifies the details relating to Unpaid Principal, Interest paid, due to be paid, Unpaid etc to be disclosed. Also required to file half yearly return to Ministry of Corporate affairs (MCA) stating the amount due and reasons for such delay.

V. Credit Linked Capital Subsidy Scheme:

In order to provide competitiveness, MSME are encouraged to invest in new technology with benefit of subsidies on purchase of new plant & machinery or equipments.

VI. Incubation:

MSME gets 75-80% of the project cost from government where it is involved in the implementation of new or innovative designs, ideas or product.

VII. Subsidized Electricity:

The concession is allowed to all the enterprises that make application to department of electricity along with Certificate of MSME.

VIII. Patent Registration:

In order to encourage MSME to patent their products, financial assistance/ subsidy is given on Patent registration.

IX. Waiver of Stamp duty & Registration Fees:

All new industrial units having MSME Registration and expansions will be exempted from payment of Stamp Duty and Registration fees.

X. Preference in Procuring Government:

Special treatment is given in applying for government tenders and procuring by PSUs.

1.4 Aatmanirbhar Bharat Scheme

In order to combat against the covid 19 impact on MSME, several measures are taken to improve the liquidity:

1. Emergency credit line to business/ MSMEs from banks and NBFC upto 20% of entire outstanding credit as on 29.02.2020.

a) Borrower upto Rs 25 crore outstanding and Rs 100 cr turnover eligible

b) No fresh collateral/ guarantee fees

c) Loan has a tenor of 4 years with moratorium of 12 months on Principal repayment

d) Interest to be capped

e) 3 lakh crores of funds earmarked

II. 20,000 crore subordinate debt for MSMEs who are either stressed or NPA

III. Rs 50,000 cr. Equity infusion for MSMEs through Fund of Funds

IV. Global tenders will be disallowed in Government procurement tenders upto Rs 200 crores

V. CHAMPIONS:

To manage all the benefits mentioned above, a new ICT based system called CHAMPIONS has been launched. The portal is not only helping and handholding MSMEs in the present situation, but is also providing guidance to grab the new business opportunities in the long run, become national and international Champions.

1.5 FAQ

Q.1 Can Trading Enterprises register under MSME?

Ans: Trading enterprises are not covered, only manufacturing & services enterprises can be registered as MSME. However, ”Interest Subvention Scheme to MSMEs 2018” as mentioned earlier has been extended to trading activities without Udyog Aadhar Number also- RBI circular No. RBI/2019-20/155 dated Feb 5, 2020.

Q.2 Is MSME updated to Udyog Aadhar?

Ans: Yes, MSME registration has been replaced with the Udyog Aadhar registration. The registration with MSME/Udyog Aadhar can be done in two ways online and offline.

Q.3 Is Aadhar card compulsory?

Ans: Yes, aadhar card is mandatory for MSME registration. In case other than proprietor, the Aadhar card of the partner and the director will be required.

Q.4 Can existing and new businesses both apply?

Ans: Yes, an existing and new business can apply for MSME/Udyog Aadhar registration. Provided the existing unit is functioning and meets the threshold limits for registration.

Q 5.What are the activities specifically excluded from coverage under MSME?

Ans: Ministry of Micro, Small and Medium Enterprises (MSME) has clarified as per notification S.O 2576 (E) dated 18.09.2015 and subsequent notification no S.O 85(E) dated 10.1.2017, activities that would be specifically not included in the manufacturing or service sector.

NIC CODE Activity

02 Forest and Logging

03 Fishing and aquaculture

45 Wholesale, retail trade and repair of motor vehicle and motorcycles

46 Wholesale trade except for motor vehicles and motorcycles.

47 Retail Trade Except of Motor Vehicles and motor cycles

97 Activities of households as employees for domestic personnel

98 Undifferentiated goods and services producing activities of private house-holds for own

99 Activities of extraterritorial organizations and bodies

Conclusion:

To conclude, MSME enjoys a wider range of benefits which allows it to grow and compete with larger business organizations. The new scheme launched during covid 19 further allows new enterprises to enjoy its status once they fall within the limits. Given the government’s efforts to promote the MSME, it is advisable to apply and get themselves registered as MSME in order to recoup the business from the currently worsening pandemic situation.

However, in order to make its reach to the maximum, Banks, NBFCs, RBI & Governments have to work in harmony and put all the efforts to bring words into actions as soon as possible.

Disclaimer: The above article is only for information purpose and is on based on the author’s interpretation of the relevant provision. The same should not be considered as professional advice.

To know more about the MSME schemes, you may contact the author for further information at 8100453977 or [email protected]