How to Register as a MSME in India ?

COVID19 has undoubtedly caused the globe to come to an unprecedented halt by not only claiming millions of lives even so posing a bigger challenge for the economy as a whole to make the ends meet. It even seems that the age old adage ‘survival of the fittest’ has come to life at these trying times.

On 13^th May 2020 Hon. Finance Minister Nirmala Sitharaman introduced a series of measures towards uplifting the economy. in a way to mirror what the prime minister coined as “Atmanirbhar Bharat” – a way to empower the country with infusion of liquidity and creation of a self sufficient & self reliant India.

 This could not have been possible without the inclusion of the MSME sector in the set of reforms introduced as, MSMEs in total contribute to 45% of India’s Industrial Employment 50% of India’s Total Exports and 95% of all industrial units of the country and more than 6000 types of products. Businesses registered as MSMEs are entitled to numerous facilities and benefits, thus it becomes pertinent to examine which businesses fall under the definition of MSMEs and what all compliances need to be made to register as the one to reap the benefits presented by the government.

Definition of MSMEs:

MSMEs is an acronym for Micro, Small and Medium Enterprises. In a developing country like India MSMEs form the backbone of the economy.

In her latest press conference on 13^th May 2020 , the finance minister proposed to change the definition of MSME(Micro, Small and Medium Enterprises) in order to bring both service & manufacturing sector MSMEs under the same bracket of  composite criteria of investment and turnover. The categorization is as illustrated in a table below for better understanding :

Existing MSME Classification

 Criteria : Investment In Plant & Machinery

Revised MSME Classification

Composite Criteria : Investment And Annual Turnover

Registration Requirements & Benefits of Registering as an MSME:

Benefits:

Subsequent to qualifying as a MSME the following needs to be ensured to get registered in order to reap maximum benefits available which are:

• Various tax rebates offered to businesses registered as MSMEs
• MSME Act 2006 specifies 45 day credit period for the recipient of any goods or services to pay to the MSME supplier.
• They get easy access to credit(loan)
• Quality Management Standards & Quality technology Tools: It helps the MSMEs to understand the need for delivering quality products and businesses are sensitized via conferences, seminars and activities.
• Helps innovators with the implementation of their new design or ideas by Govt financing of 70-80% of the project cost.
• Capital subsidy is given to the businesses which upgrade from the use of obsolete technology
• Further it’s a boon for the women entrepreneurs to start their own businesses with the Govt providing them with requisite capital, counseling and training.

Other  recent interventions for MSME Upliftment( As per Atmanirbhar Bharat proposals announced on 13^th May 2020)

• E Market linkage for MSMEs to be promoted to act as a replacement for trade fairs and exhibitions.

• Fintech will be used to enhance transaction based lending using the data generated by the e marketplace.
• Government has been continuously monitoring settlement of dues to MSME vendors from Government and Central Public Sector Undertakings.

• MSME receivables from Gov and CPSEs to be released in 45 days

Registration:

An important highlight when seeking registration is that trading concerns(both retail and wholesale) are not eligible for registration under the provisions of this Act. (Also stated in the exclusions listed below) In order to get registered the company needs to fill an online form, without any registration fees. The registration form can be accessed at udyogadhaar.gov.in (which is an online portal for all MSME Registrations) and keep the following documents handy:

• Copy of an Adhaar Card – In case of an entity other than proprietorship firm, the adhaar of partner or director is required
• Copy of Partnership Deed/MoA/AoA
• Copy of Sale/Purchase bill
• Copy of Business Address proof(E.g: lease deed, property tax receipt or NOC from the landlord (if not owned))
• 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 Govenment 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.
• For the compliance part, Form MSME needs to be filed on the MCA Portal for furnishing half yearly return in respect of outstanding payments to Micro or Small enterprise.

Procedure of registration:

1. Subsequent to reaching the udyogaadhaar website , a Mobile OTP is generated;

2. Consequent to which compulsory fields like PAN, Name & Type of organization, Activity type(Service or Manufacturing), Address, Bank Details need to be filled in

• Investment in Plant & Machinery(Purchase Amount) also needs to be filled in;
• NIC Code details too need to be entered to select the type of business
• After filling in the details an E-mail ID OTP needs to be entered before final submission.
• An Udyog Aadhaar Memorandum & an Acknowledgement is issued after successful registration

Activities excluded from the MSME Act 2006:

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 production of commodities or rendering of services as per Section 7 of the said Act.

• Forest and Logging
• Fishing and aquaculture
• Wholesale, retail trade and repair of motor vehicle and motorcycles
• Wholesale trade except for motor vehicles and motorcycles.
• Retail Trade Except of Motor Vehicles and motor cycles
• Activities of households as employees for domestic personnel
• Undifferentiated goods and services producing activities of private households for own
• Activities of extraterritorial organizations and bodies

More FAQs on Registration:

1. Do I need multiple registrations for manufacturing plants in different cities?

Ans. No. The MSME/Udyog Aadhar certificate is for a single entity irrespective of multiple branches or plants. However, information about multiple branches or plants must be furnished.

2. 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.

3. 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.

Conclusion & Suggestion:

Thus in order to fully benefit from the recent benefits announced for the MSMEs and in order to recoup the business from the currently worsening pandemic situation any business falling under the above stated investment and turnover limits should not think twice in registering themselves as MSME and save themselves from the higher compliance requirements those are required by other businesses to comply with. It is the right time to grow with the seed of an idea in the business world because the Government is ready to feed that idea and give it a chance to grow not only to become self sufficient but also to be ready to serve across the globe with the finesse imbibed in us.

However as a suggestion I would like to emphasize that if trading concerns are also included to qualify as MSME , it would act as an encouragement to them to experience the similar growth with small capital as any manufacturing concern would.