The Government of India in agreement with the Micro, Small, and Medium Enterprises Development (MSMED) Act of 2006, has introduced Micro, Small, and Medium Enterprises (MSME Registration). These enterprises specialize in the production, manufacturing, processing, or storage of goods and commodities.MSMEs in India account for around 8% of the country’s GDP, 45 percent of manufacturing output, and over 40% of exports. It is not incorrect to refer to them as the ‘backbone of country’s economy.
MSMEs actually are a vital part of the Indian economy and have made significant contributions to the country’s socio-economic growth. It not only creates job possibilities but also contributes to the development of the country’s backward and rural areas. According to the government’s annual report (2018-19), India has roughly 6, 08, 41,245 MSMEs. Although the government has not made MSME Registration mandatory, it is advantageous to have one’s business registered under it because it provides numerous benefits in terms of taxation, business setup, credit facilities, and financing. On October 2, 2006, the MSME became functioning. It was created to help micro, small, and medium enterprises compete more effectively by promoting, facilitating, and developing their competitiveness.
New Definition of MSME
The Micro, Small, and Medium Enterprises Development (Amendment) Bill, 2018, proposes to redefine MSMEs by classifying them as manufacturing or service-providing businesses depending on their yearly turnover.
There would be no need for periodic inspections to check the investment in plant and machinery under the proposed reclassification or new classification. In addition, MSMEs’ operations would be transparent, non-discriminatory, and objective.
The existing MSME classification system was based on plant and machinery or equipment investment. As a result, in order to benefit from MSME, MSMEs must limit their investment to a lower level, as detailed below:
|Existing MSME Classification|
|Manufacturing||Investment||<Rs. 25 lakh||<Rs. 5 crore||<Rs. 10 crore|
|Services||Investment||<Rs. 10 lakh||<Rs. 2 crore||<Rs. 5 crore|
Because they are unable to extend their businesses any farther, these lower boundaries are destroying the will to grow. In addition, there has been a long-standing need for the MSME classification to be revised so that they can continue to benefit from MSME benefits while expanding their operations.
The government has now changed the MSME classification* under the Aatmanirbhar Bharat Abhiyan (ABA) by including composite criteria for both investment and annual turnover. In addition, the MSME definition no longer distinguishes between the manufacturing and service industries. This removal will bring the sectors closer together.
The following is the updated MSME classification*, which takes into account both investment and yearly turnover when determining an MSME.
|Revised MSME Classification|
|Investment & Annual Turnover||<Rs. 1 crore &<Rs. 5 crore||<Rs. 10 crore &<Rs. 50 crore||<Rs. 50 crore &<Rs. 250 crore|
* The government has made another upward revision.
MSME Registration Process
The MSME Registration can be done by the following:
- New Entrepreneurs who are not Registered yet as MSME and
- Those having registration as EM-II or UAM and those having registration as EM-II or UAM through Assisted filing
Udyam Registration For New Entrepreneurs
- To register as an MSME, new entrepreneurs need to go to the official website of the Ministry of Micro, Small Medium Enterprises.
- On the home page, click the “For New Entrepreneurs who are not registered as MSME” tab on the front page.
- The Aadhaar card number is entered in one of two ways when registering an MSME for the first time:
- PAN Card Registration
- Non-PAN Card Registration
Udyam Registration with PAN Card
Follow the steps below to do registration with a PAN card:
- Once you click on “For New Entrepreneurs who are not registered yet as MSME” button on the homepage of the government website i.eMinistry of Micro, Small Medium Enterprises, a new page for registration will open.
- Now, you need to enter the Aadhaar number and the name of the entrepreneur.
- After filling the correct information, click on “Validate and Generate OTP’ Button.
- Now you will receive an OTP which you need to type here.
- Once you type the OTP, the PAN Verification page will open.
- If the entrepreneur has a PAN Card, the portal retrieves the PAN information from government databases and fills the page automatically. The entrepreneur is responsible for filling out the ITR details.
- After the PAN data is filled, a message displays that says, “Udyam Registration has already been done through this PAN,” and the entrepreneur must click the “Validate PAN” button to complete the process.
- The Udyam Registration box will appear after the PAN has been verified, and the entrepreneurs must fill in their personal information as well as the details of the plant or enterprise.
- After filling in the details and clicking the “Submit and Get Final OTP” button, the MSME is registered and a message of successful registration with a reference number appears. The Udyam Registration Certificate is issued after the registration is verified, which may take a few days.
Registration without PAN Card
Follow the steps below to do registration without a PAN card:
- On the government portal’s homepage, click the button “For New Entrepreneurs who are not yet registered as MSME.” It takes you to a registration page where you must input your Aadhaar number and the name of the entrepreneur.
- After providing these details, click the “Validate and Generate OTP Button.”
- The PAN Verification page appears after this button is clicked and an OTP is received and submitted. If the business owner does not have a PAN card, pick the “No” option under the subject “Do you have PAN?” and then click the “Next” button.
- After clicking the “Next” button, the Udyam Registration page appears, where the entrepreneur must input his personal information as well as information about his plant or industry.
- Once the details are filled out, click “Final Submit,” button and a thank you message with the registration number will display. To avoid the suspension of Udyam Registration, the PAN and GSTIN must be updated on the portal before April 1, 2021.
MSME Registration for Entrepreneurs Already Having EM-II Or UAM
Those who have already registered as an EM-II or UAM follow the below steps
- Click the button on the government portal’s home page that says “For those who have already registered as an EM-II or UAM” or “For those who have already registered as an EM-II or UAM through Assisted filing.”
- This will take you to a screen where you can enter your UdyogAadhaar number and choose an OTP option.
- The alternatives are to get an OTP on your phone as a filled-in UAM or to get an OTP through email as a filled-in UAM.
- After selecting the OTP options, click “Validate and Generate OTP.”
- After inputting the OTP, fill in the registration data, and your udyam registration will be complete.
Details Needed for MSME Registration
- The Udyam Registration Portal would automatically take PAN and GST-linked information on investment and turnover from government databases.
- So, the only document required for MSME registration is an Aadhaar Card.
- MSME registration can be completed entirely online, with no verification of documentation required.
- The Income Tax and GSTIN systems are fully connected with the Udyam Registration Portal.
- From April 1, 2021, PAN and GSTIN numbers will be required for registration. Registration without a PAN and GSTIN is possible presently, however it must be updated with a PAN and GSTIN number by April 1, 2021 to avoid suspension.
New MSME Highlights
- A provision of Collateral-Free Loans to MSMEs.
- An arrangement of loans to MSMEs MSME worth Rs. 3 lac crores.
- An offer for MSMEs to get a 12-month Moratorium period.
- Consideration of Manufacturing and Service MSMEs as the same entities MSM is granted a repayment tenure of 48 months.
- MSMEs are assured a 100 percent Credit Guarantee.
- MSMEs will profit from reclassification in the amount of 45 Lac units.
Udyam Registration Features
The following are some of the most important features of MSMEs:
- MSMEs seek to improve the lives of workers and craftsmen. They assist them by offering employment, loans, and other services.
- MSMEs provide banks with credit limits or funding assistance.
- They encourage the growth of entrepreneurship as well as the upgrading of skills by establishing specialized training institutes.
- They are in favor of improving developmental technologies, expanding infrastructure, and modernizing the sector as a whole.
- MSMEs are known for providing reasonable support in gaining entry to domestic and international markets.
- They also provide quality certification services and modern testing facilities.
MSME Registration Advantages
Following are some of the benefits of MSME Registration:
- Bank loans become cheaper as a result of MSME registration because the interest rate is relatively low, around 1 to 1.5 percent. Interest rates are far lower than those charged on traditional loans.
- Once registered, the cost of obtaining a patent or establishing an industry is reduced by as many rebates and concessions as available.
- It also permitted minimum alternative tax (MAT) credits to be carried forward for up to 15 years rather than the previous 10 years.
- For unpaid MSME payments, there is a One-Time Settlement Fee.
- Because the Udyam Registration Portal is integrated with the Government e-Marketplace and numerous other State Government websites that provide easy access to their marketplaces and e-tenders, MSME registration makes it easier to get government tenders.
Various MSME Schemes Launched by the Government
Grievance Monitoring System: In terms of getting concerns from business owners addressed, registering under this system is advantageous. Business owners can use this to check the progress of their complaints and to open them if they are unhappy with the outcome.
This program assists innovators in putting their novel designs, ideas, or products into action. This program offers financial help for the establishment of ‘Business Incubators.’ This program encourages the development of innovative concepts, designs, and products.
Technology and Quality Upgradation Scheme:
By enrolling in this program, micro, small, and medium businesses will be able to deploy energy-efficient technologies (EETs) in their industrial units, lowering production costs and promoting a clean development strategy.
Credit Linked Capital Subsidy Scheme:
Under this program, company owners are given new technology to replace their old and outmoded technology. A capital subsidy is given to a company so that it can upgrade and improve its operations. Small, micro and medium businesses can approach banks directly for these subsidies.
Yes, Udyam Registration has taken the place of MSME registration. If a micro, small, or medium-sized firm wishes to begin operations, it must first register with MSME/Udyam Registration. This MSME/Udyam registration is entirely online. This facility offers numerous benefits and subsidies to the company.
Yes, both existing and new businesses can apply for MSME/Udyam registration, as long as the existing unit is operational and meets the registration requirements. To take advantage of MSME incentives, UAM registration must be re-registered as Udyam registration.
Yes. An Aadhaar card is required for registration under the Udyam scheme. If the applicant is not the proprietor, the partner’s and director’s Aadhaar cards would be required.
No. Only manufacturing and service industries are covered under MSME. The scheme does not cover trading companies. Trading businesses are similar to middlemen, a link between manufacturer and customer, and MSME is to support entrepreneurs with subsidies and incentives. As a result, the scheme does not cover it.
No, the MSME/Udyam Registration Certificate only applies to a single organization, regardless of how many branches or plants it has. Information about multiple branches or plants, on the other hand, must be provided.
The Udyam Registration Certificate has no expiration date. The certificate will not expire as long as the entity is ethical and financially sound.