Importance of MSME
In 2006, a policy to address the issues affecting the MSME’s was introduced in the name of Micro Small and Medium Enterprises Development (MSMED) Act. The Act is the first-ever legal framework for the recognition of the enterprises.
- MSMEs sector has emerged as a dynamic sector and backbone of Indian economy
- It plays an important role in employment generation at comparatively low capital cost
- It helps to industrialize rural and backward areas
- This vibrant sector has reduced the regional imbalances assuring more equitable distribution of national income and
- It also contribute to the large industries as an ancillary unit
Eligibility and Who can apply
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Existing MSME Clasification |
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| Criteria: Investment in Plant & Machinery or Equipment | ||||
| Classification | Micro | Small | Medium | |
| Manufacturing
Enterprises |
Investment < Rs.25 lac | Investment < Rs. 5cr | Investment < Rs. 10 cr | |
| Service Enterprises | Investment < Rs.10 lac | Investment < Rs. 2cr | Investment < Rs. 5 cr | |
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Revised MSME Classification Effective from 1st July,2020 |
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Composite Criteria: Investment and Annual Turnover |
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| Classification | Micro | Small | Medium | |
| Manufacturing & Services | Investment upto Rs 1 cr. and Turnover upto Rs 5.cr | Investment upto Rs 10 cr. and Turnover upto Rs 50 cr. | Investment upto Rs 50cr. and Turnover upto Rs 250.cr | |
Note: As per Office Memorandum dated 9th August,2021 issued by Ministry of MSME Street vendors can register as retail trades.
Earlier as per Office Memorandum dated 02nd July,2021 Wholesale and Retail trades has been included as MSMEs and they are now allowed to be registered as MSME.
MSME registration can be applied through the form Udyam following details is required in the form:
- Aadhar Number of the owner
- Name of entrepreneur
- Social category
- Type of organization
- Postal address
- Date of commencement
- Previous registration details if any,
- Bank details
- Major activity (manufacturing or service)
- NIC code
- Persons employed
- Investment in plant , machinery and equipment
What happens when eligibility criteria of MSME exceeds
In case of graduation (from a lower to a higher category) or reverse- graduation (sliding down to lower category) of an enterprise a communication will be sent to the enterprise about the change in the status.
In case of an upward change in terms of investment in plant and machinery or equipment or turnover or both, and consequent re-classification, an enterprise will maintain its prevailing status till expiry of one year from the close of the year of registration.
In case of reverse-graduation of an enterprise, whether as a result of re- classification or due to actual changes in investment in plant and machinery or equipment or turnover or both, and whether the enterprise is registered under the act or not, the enterprise will continue in its present category till the closure of the financial year and it will be given the benefit of the changed status only with effect from 1st April of the financial year following the year in which such change took place
Updation and cancellation of MSME Registration
Facility for updation of any details if wrongly entered in UDYAM CERTIFICATE is provided in udyam Portal except the following.
- Name of the entrepreneur
- Aadhaar number
- Similarly MSME units can cancel their udyam certificate based on the reasons provided in the portal.
Public Sector Bank loan in 59 minutes (in principle approval)
Micro, Small and Medium Enterprises (MSMEs) play an important role in the social and economic development of India. Access to timely and adequate finance is one of the crucial challenges faced by the sector. It is of paramount importance to cater to funding needs of this important segment of Indian economy along with simplifying decision-making process for a credit manager.
The user-friendly platform offers a simple loan application journey where an MSME borrower is not required to visit the bank branch for In-principle approval. The initiative automates various processes to Loan Appraisal in such a way that the borrower gets an In-principle approval in less than 59 minutes.
MSME Term Loan and Working Capital Loan . In-Principle Loan approval from INR 1 Lakh upto INR 5 cr.
- Mudra Loan finance to non-farming and non-corporate micro and small In-Principle approvals provided upto INR 10 lacs.
Trade Receivables Discounting System Platform (TReDS) setup by Reserve Bank of India for MSME
In View of Promotion, Development and Enhancement of Competitiveness of Micro, Small and Medium Enterprises (MSME) notification dated 02nd November 2018 issued by Ministry of MSME.
Every company registered under the Companies Act, 2013 and having turnover of more than Rs. 500 Crore and all Central Public Sector Enterprises (CPSE) shall be required to get themselves onboarded on the Trade Receivables Discounting System Platform (TReDS) setup by Reserve Bank of India.
TReDS platform in India which are operating under RBI guidelines
- M1xchange
- Treds
- Receivable exchange of India
TREDS: Why MSMES need to register right now
- TReDS is an electronic platform that allows businesses to auction trade receivables such as invoices, and the platform serves as a transparent and quick medium for the MSME vendors to avail funds at cheaper rates through banks and factoring
- It involves a digital mechanism having 3 stakeholders, the corporate buyer, the MSME supplier and the financier(Bank and NBFC factors permitted by RBI).
- The MSME supplier uploads an invoice on M1xchange platform which is approved by its
- On approval, the invoice is opened for bidding by various financiers on the
Once the MSME accepts the best suited bid, the discounted amount is credited to the MSME’s bank account on the next day of bid acceptance. This gives MSMEs quick access to working capital at a very low rate of interest.
Key Benefits of TREDS registration
- Get easy and quick working capital at much cheaper interest rates as compared to business
- Enjoy collateral-free quick finance with one time documentation
- Get paid for your invoices next day after acceptance of discounted
- Obtain off-balance sheet finance, the amount does not reflects as a loan in your balance
- Maintain a regular cash flow with M1xchange and grow your business
Reporting to Registrar of Companies
Every company who get supplies of goods and services from MSME and whose payment to MSME supplier exceeds 45 days from the date of acceptance or the date of deemed acceptance of the goods or services shall submit a half yearly return to the MCA stating the following:
- a) amount of payment due; and
- b) the reasons for delay
Consequences of delay payment to MSME
- As per section 15 of MSME ACT, If the buyer fails to make payment of the amount to the supplier as required under terms and conditions of supply, (but not later than 45 days) than the buyer is liable to pay compounded interest with monthly rests from the date falling after due date, at three times of the bank rate notified by the Reserve Bank of India
- As per section 16 of MSME ACT, where buyer fails to make payment of the amount to the supplier, as required under section 15 , the buyer shall, notwithstanding anything contained in any agreement between the buyer and supplier or in any law for the time being in force, be liable to pay compounded interest with monthly rests to the supplier on that amount from the appointed day or, as case may be from the date immediately following the date agreed upon, at three times of a bank rate notified by Reserve Bank of India.
Dispute Resolution procedure
Any party to a dispute may with regard to amount and interest can make a reference to the Micro and Small Enterprises Facilitation Council
On receipt of a reference the council shall either itself conduct conciliation in the matter or seek the assistance of any institution or center providing alternate dispute resolution services by making a reference to such an institution or center, for conducting conciliation and the provisions of the Arbitration and Conciliation Act,1996 shall apply.
- Every reference made under MSME ACT,2006 shall be decided within a period of 90 The buyer to the dispute can be located anywhere in India. Only the supplier’s jurisdiction is to be seen.
- If the buyer does not accept the decree or award of the council or of the arbitrator, no court shall entertain the buyer’s application, unless 75% of the amount in terms of decree or award is deposited by the
MSME E- Samadhan (Delayed Payment Monitoring System)
Ministry of MSME has taken an initiative for filing online application by the supplier MSME unit against the buyer of goods/services before the concerned MSEFC of his/her State/UT. These will be viewed by MSEFC Council for their actions. These will be also visible to Concerned Central Ministries, Departments, CPSEs, State Government, etc for pro-active actions.
MSEFC of the State after examining the case filed by MSE unit will issue directions to the buyer unit for payment of due amount along with interest as per the provisions under the MSMED Act 2006.
Author Bio
hi,
if , on principle amount payment of long outstanding balances to vendor, can we reverse the provision on interest relating to MSME payments?
Thanks