MSME- Definition, Benefits and Registration

What are Micro, Small and Medium Enterprises

Under Micro, Small and Medium Enterprises Development(MSMED) Act, 2006, the Micro, Small and Medium Enterprises(MSME) are classified into two categories

1. Manufacturing Enterprises: These are those enterprises which are engaged in the manufacture or production of goods relating to industry specified in the first schedule to the industries(Development and Regulation) Act, 1951) or employment of plant and machinery to add value to the final product.

2. Service Enterprises: The enterprises which are engaged in providing or rendering of services. The categories and are defined in terms of investment in equipment.

Activities specifically excluded from the definition of 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.

1. Forest and Logging
2. Fishing and aquaculture
3. Wholesale, retail trade and repair of motor vehicle and motorcycles
4. Wholesale trade except for motor vehicles and motorcycles.
5. Retail Trade Except of Motor Vehicles and motor cycles
6. Activities of households as employees for domestic personnel
7. Undifferentiated goods and services producing activities of private households for own
8. Activities of extraterritorial organisations and bodies

Classification of MSME Enterprises

The Finance Minister has amended the classification of MSME in her latest announcement of economic package of 3 lakh crores on 13^th May, 2020. With this classification, the government has eroded the difference between manufacturing and services.

Benefits of MSME Registration

1. Under Credit Guarantee Fund Scheme of Micro and Small Enterprises(MSEs), the Government has given collateral-free credit to MSEs. In a recent announcement, the govt has announced 3 lakh crore of credit guarantees to MSMEs which is intended to help MSMEs having 25 crore outstanding loan or less than 100 crore turnover.
2. Business registered under MSME are given higher preference for government license and certification
3. Cheaper bank loans as the interest rate is very low around~1 to 1.5%.
4. It allowed credit for minimum alternate tax(MAT) to be carried forward for up to 15 years instead of 10 years.
5. There are various tax rebates available
6. The expenses incurred for registration of patent and application of ISO certification are reimbursed to these enterprises subject to the limits
7. MSME can avail Bar Code Registration subsidy.
8. Concession in electric bills by making application to Electricity department
9. There is One Time Settlement Fee for non-paid amounts of MSME.

Documents required for MSME registration

The following documents are required for registration as Micro, Small and Medium Enterprises:

• Business Address Proof
• Copies of Purchase and Sale bill
• Partnership deed in case of Partnership, Memorandum of Association and Articles of Association in case of Companies
• Bills of purchase of Plant & Machinery, Copy of license if any