MSME – Registration & Benefits for Trading and small scale manufacturer’s & Service Industries

MSME stands for Micro, Small and Medium Enterprises. 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.

1. Major Announcement made by FM for MSME- Measures Announced for MSMEs on 13th May 2020

> Global Tenders up to Rs. 200 Crore:

 Govt. expands scope for global tenders for MSMEs In order to protect the MSMEs from unfair competition from foreign companies, the Govt. has decided to take a major step towards Self-reliant India by disallowing Government procurement tenders up 200 Crores for foreign Companies, this step would give major boost to medium enterprises in India which faces tough competition at hands of foreign players.

> 50,000 Crores equity infusion for MSMEs through funds of funds

The Govt. has proposed to set up Funds of Funds with corpus of Rs. 10,000. The corpus would provide equity funds for MSMEs with growth potential and viability. This step would help to expand MSME size as well as capacity and will also encourage listing of MSMEs on main board of stock exchanges.

> 3 lakh Crores Collateral-free automatic loans for business, MSMEs

There is a  relief is for those MSMEs which were already working before lockdown and running loans from banks/NBFCs and running them in standard category and they are facing the cash crunch due to the lock down. For those MSMEs, to resume their operations i.e. to start procuring material, payment of wages/salaries, payments to vendors etc. this facility of emergency credit Line up to 20% of their entire outstanding credit as on 29th Feb 2020.

> Eligibility:

Borrowers having outstanding up to Rs. 25 Crores and turnover of Rs. 100 crores are eligible to take benefit.

> Tenure

The tenure of the loan would be 4 years with moratorium of 12 months on Principal repayment.

> 100% credit guarantee

There will be 100% credit guarantee cover to Banks and NBFCs on principal and interest.

> Validity

This scheme can be availed till Oct 31, 2020 (Chances to extend up to dec 20 )

> 20,000 crores subordinate debt for stressed MSMEs

    • Stressed MSMEs need Equity Support
    • Functioning MSMEs which are NPA or Stressed will be eligible
    • GOI will support Rs. 4000 Cr. To CGTMSE
    • CGTMSE will partially support the Banks
    • Promoters of the MSMEs will be given Debt by Banks which will in turn infuse by the promoter in the Equity of the Unit

2. What are Micro, Small and Medium Enterprise?

The existing MSME classification was based on the criteria of investment in plant and machinery or equipment. So, to enjoy the MSME benefits, the MSMEs have to limit their investment to a lower limit, as mentioned below:

Existing MSME Classification valid till 30th June 2020

Sector Criteria Micro Small Medium
Manufacturing Investment < Rs.25 lakh < Rs.5 crore < Rs.10 crore
Services Investment < Rs.10 lakh < Rs.2 crore < Rs.5 crore

These lower limits are killing the urge to grow as they are unable to scale their businesses further. Also, there has been a long-pending demand for the revision of MSME classification so that they can further expand their operations while continuing to avail the MSME benefits.

Now, under the Aatmanirbhar Bharat Abhiyan (ABA), the government revised the MSME classification* by inserting composite criteria of both investment and annual turnover. Also, the distinction between the manufacturing and the services sectors under the MSME definition has been removed. This removal will create parity between the sectors. The following is the revised MSME classification*, where the investment and annual turnover, both are to be considered for deciding an MSME.

Revised MSME Classification wef 01.07.2020*

Criteria Micro Small Medium
Investment 

       & 

Annual Turnover

< Rs.1 crore

&

< Rs.5 crore

< Rs.10 crore

&

< Rs.50 crore

< Rs. 50 crore

&

< Rs. 250 crore

Please note above Revised Definition is applicable from 01.07.2020- Govt notifies revised criteria for classification of MSME

3. Registration :

i.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.

ii. If a person wants to do registration for more than one industry then also he/she can do individual registration.

iii. To do the registration he/she has to fill a single form which is available at the website which is listed below.

iv. The document required for the registration are below.

    • Aadhar Card of Authorized Person (I.e. Proprietor, Any Partner, Any Director)
    • Social Category of Authorized Person
    • Name of Enterprise, Type of Enterprises
    • PAN of the Enterprises
    • Registered Address of Business
    • Location of Plants
    • Date of Commencement
    • Bank Details
    • No of Person Employed
    • Investment in Plant and Machinery/Equipment & Turnover Details. (Note: Value of Plant & Machinery to be taken as the Cost and not the after depreciation value)
    • National Industry Classification Code(NIC Code)

4. Benefits for Trading and small scale manufacturer’s & Service Industries.

a. Loans without collaterals:

The Government has introduced various initiatives for MSME/SSI that allow them to avail credit without collateral. One of the best MSME registration benefits, the initiative to provide collateral-free loan is undertaken by GOI (Government of India), SIDBI (Small Industries Development Bank of India) and the Ministry of Micro, Small and Medium Enterprise under the name The Credit Guarantee Trust Fund Scheme. This is by far the best MSME registration benefits for small business owners.

b. Subsidy on Patent Registration & Industrial Promotion:

Business enterprises registered under the MSME Act are given a hefty subsidy of 50 per cent for patent registration. This can be availed by sending an application to the respective ministry. In addition to this, one of the great MSME registration benefits is to get subsidy for industrial promotion suggested by the Government.

c. Overdraft facility along with Interest Rate Exemption:

Businesses or enterprises registered as MSME/SSI under the MSME Act are eligible to avail a benefit of 1% on the overdraft as part of the Credit Guarantee Trust Fund Scheme. Although this can vary from bank to bank.

d. Concession on Electricity:

One of the simplest MSME registration benefits, businesses registered under the MSME Act can avail a concession on electricity bills. All they have to do is submit the bills along with an application and a copy of the registered certificate by MSME.

e. Protection against Delayed Payments:

Understanding the ambiguity lying with business revenues, the Government has extended a helping hand by providing a layer of protection against payments. As of now, the Ministry of Micro, Small and Medium Enterprise has given business owners and enterprises to collect interest on payments delayed by the buyer.

Under the MSME registration benefits, a buyer is expected to make a payment for the goods/services within 15 days of the purchase. If the buyer delays, the payment for more than 45 days, the enterprise is eligible to charge compound interest which is 3 times the rate notified by RBI.

f. ISO Certification Charges Reimbursement:

A registered small or medium enterprise can claim the expenses for reimbursement that were spent on ISO certification.

The MSME industry is growing significantly due to the constant support from the Indian Government. This has further inspired everyone, especially the youth, to explore their entrepreneurial side and start their own venture. However, in such cases, knowledge regarding MSME and MSME registration benefits are a must to know.

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One Comment

  1. ahmad05 says:

    Hi,
    A merchant exporter who sale product in his own brand name but manufacture by other, registered under MSME? Sale in India and also abroad.
    Thanks.

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