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Budget 2019 Announcement!

GST registered MSMEs can get 2% interest subvention from Government for incremental loans of Rs 1 crores under the MSME Credit Scheme

MSME stands for Micro, Small and Medium Enterprises. In a developing country like India, MSME  industries are the backbone of the economy.

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.

Even if the Company is in the manufacturing line or the service line, registrations for both these areas can be obtained through the MSME act. This registration is not yet made mandatory by the Government but it is beneficial to get one’s business registered under this because it provides a lot of benefits in terms of taxation, setting up the business, credit facilities, loans etc.

The MSME became operational on October 02, 2006. It was established to promote, facilitate and develop the competitiveness of the micro, small and medium enterprises.

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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
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
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
* Further upward revision made by the government

MSME Registration Process

MSME registration is to be done in the government portal of udyamregistration.gov.in. New entrepreneurs need to click the button “For New Entrepreneurs who are not Registered yet as MSME” shown on the home page for registering MSME. New registration of MSME is done by entering the Aadhaar card number with or without PAN Card.

1. Registration With PAN Card:

When clicked on the “For New Entrepreneurs who are not Registered yet as MSME” button on the homepage of the government portal, it opens the page for registration and asks to enter the Aadhaar number and the name of the entrepreneur. After entering these details, “Validate and Generate OTP Button” is to be clicked. Once, this button is clicked and OTP is received and entered, the PAN Verification page opens. If the entrepreneur has a PAN Card, the portal gets the PAN details from the government databases and automatically fills details on the page. The ITR details are to be filled by the entrepreneur.



Once PAN details are entered, a message appears as “Udyam Registration has already been done through this PAN” and the entrepreneur needs to click the “Validate PAN” button.



After verification of PAN, the Udyam Registration box will appear and the entrepreneurs need to fill the personal details and details of the plant or industry.



Once the details are filled, the “Submit and Get Final OTP” button is clicked, the MSME is registered and a message of successful registration with reference number will appear. After verification of registration, which may take a few days, the Udyam Registration Certificate is issued.

2. Registration Without PAN Card:

The button “For New Entrepreneurs who are not Registered yet as MSME” is to be clicked on the homepage of the government portal. It opens the page for registration and asks to enter the Aadhaar number and the name of the entrepreneur. After entering these details, “Validate and Generate OTP Button” is to be clicked. Once, this button is clicked and OTP is received and entered, the PAN Verification page opens. If the entrepreneur does not have a PAN Card, the “No” option under the heading “Do you have PAN?” is to be clicked and then the “Next” button.



After the “Next” button is clicked, the Udyam Registration page opens where the entrepreneur should enter his personal details and plant or industry details.





Once the details are filled, “Final Submit” is clicked and a thank you message will appear with the registration number. After getting the PAN and GSTIN, it needs to be updated on the portal within 01/04/2021 to avoid suspension of Udyam Registration.

3. Registration For Entrepreneurs Already Having EM-II Or UAM:

For those already having registration as EM-II or UAM, they need to click the button “For those having registration as EM-II or UAM ” shown on the home page of the government portal. This will open a page where Udyog Aadhaar Number is to be entered and an OTP option should be selected. The options provided are to obtain OTP on mobile as filled in UAM or obtain OTP on email as filled UAM. After choosing the OTP Options, “Validate and Generate OTP” is to be clicked. After entering OTP, registration details are to be filled and udyam registration will be complete.


Benefits of MSME Registration

  1. Due to the MSME Registration, the bank loans become cheaper as the interest rate is very low around ~ 1 to 1.5%. Much lower than interest on regular loans.
  2. It also allowed credit for minimum alternate tax (MAT) to be carried forward for up to 15 years instead of 10 years
  3. Once registered the cost getting a patent done, or the cost of setting up the industry reduces as many rebates and concessions are available.
  4. MSME registration helps to acquire government tenders easily as Udyam Registration Portal is integrated with Government e-Marketplace and various other State Government portals which give easy access to their marketplace and e-tenders.
  5. There is a One Time Settlement Fee for non-paid amounts of MSME.

Information Required for MSME Registration

Aadhaar Card is the only document required for MSME registration. MSME registration is fully online and no proof of documents is required. PAN and GST linked details on investment and turnover of enterprises will be taken automatically by the Udyam Registration Portal from the Government databases. The Udyam Registration Portal is fully integrated with Income Tax and GSTIN systems. PAN and GSTIN number is mandatory from 01.04.2021 for registration. Registration without PAN and GSTIN can be done now but have to be updated with PAN number and GSTIN number within 01/04/2021 for avoiding suspension of registration. Those who have EM-II or UAM registration or any other registration issued by any authority under the Ministry of MSME, will have to re-register themselves in this Portal (as stated in the Registration Process heading above)

MSME schemes launched by the Government are:

Technology And Quality Upgradation Scheme:

Registering in this scheme will help the micro, small and medium enterprises to use energy efficient technologies (EETs) in manufacturing units so as to reduce the cost of production and adopt a clean development mechanism.

Grievance Monitoring System:

Registering under this scheme is beneficial in terms of getting the complaints of the business owners addressed. In this, the business owners can check the status of their complaints, open them if they are not satisfied with the outcome.

Incubation:

This scheme helps innovators with the implementation of their new design, ideas or products. This scheme provides financial assistance for setting up ‘Business Incubators’. This scheme promotes new ideas, designs, products etc.

Credit Linked Capital Subsidy Scheme:

Under this scheme, new technology is provided to the business owners to replace their old and obsolete technology. A capital subsidy is given to the business to upgrade and have better means to do their business. These small, micro and medium enterprises can directly approach the banks for these subsidies.

Frequently Asked Questions


Q. Is MSME updated to Udyam Registration?
A. Yes, MSME registration has been replaced with the Udyam Registration. If any micro, small and medium industries want to start any business; they need to do the registration with MSME/Udyam Registration. This registration with MSME/Udyam Registration is completely online. This facility provides the business with a lot of benefits and subsidies.

Q. Is aadhar card compulsory?
A. Yes. For registration under the Udyam registration, an Aadhaar card is compulsory. In case an applicant is other than the proprietor, the Aadhaar card of the partner and the director will be required.

Q. Can existing and new businesses both apply?
A. Yes, an existing and new business can apply for MSME/Udyam Registration, provided the existing unit is functioning and meets the threshold limits for registration. UAM Registration has to be re-registered for Udyam registration to avail the benefits of MSME.

Q. What is the validity of the certificate?
A. There is no expiry of the Udyam Registration Certificate. As long as the entity is ethical and financially healthy there will be no expiry of the certificate.

Q. Can trading companies register under MSME?
A. No. MSME covers only manufacturing and service industries. Trading companies are not covered by the scheme. MSME is to support startups with subsidies and benefits, trading companies are just like middlemen, a link between manufacturer and customer. Hence not covered under the scheme.

Q. Do I need multiple registrations for manufacturing plants in different cities?
A. No. The MSME/Udyam Registration Certificate is for a single entity irrespective of multiple branches or plants. However, information about multiple branches or plants must be furnished.
 
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