Updated on: Oct 12th, 2023
18 min read
Small Scale Industries (SSI) are industries that manufacture, produce and render services on a small or micro scale level. In India, several SSIs exists in various fields such as handicrafts, toys, weaving, pickle making, food products, etc. These industries make a one-time investment in machinery, plant, and equipment, but it does not exceed Rs.10 crore and annual turnover does not exceed Rs.50 crore.
Update on Small Scale Industries (SSIs):
Earlier industries that manufactured goods and provided services on a small scale or micro-scale basis were granted Small Scale Industries (SSI) registration by the Ministry of Small Scale Industries. However, after the government passed the MSME (Micro, Small and Medium Enterprises) Act in 2006, the small and micro-scale industries came under the MSME Act.
On 9 May 2007, subsequent to the amendment of the Government of India (Allocation of Business) Rules, 1961, the Ministry of Small Scale Industries and the Ministry of Agro and Rural Industries were merged to form the Ministry of Micro, Small and Medium Enterprises. Thus, the SSIs are included under the Ministry of MSME.
Currently, the SSIs are classified as small or micro-scale industries based on the turnover and investment limits provided under the MSME Act and they need to obtain MSME registration. The government provides many benefits to the small scale industries having MSME registration at present.
Essentially the small scale industries are generally comprised of those industries which manufacture, produce and render services with the help of small machines and less manpower. These enterprises must fall under the guidelines, set by the Government of India.
The SSI’s are the lifeline of the economy, especially in developing countries like India. These industries are generally labour-intensive, and hence they play an important role in the creation of employment. SSI’s are a crucial sector of the economy both from a financial and social point of view, as they help with the per capita income and resource utilisation in the economy.
Generally, both the management and the control is with the owner/owners. Hence the owner is actively involved in the day-to-day activities of the business.
SSI’s dependence on technology is pretty limited. Hence they tend to use labour and manpower for their production activities.
SSI’s are more adaptable to their changing business environment. So in case of amendments or unexpected developments, they are flexible enough to adapt and carry on, unlike large industries.
Small scale industries have a restricted zone of operations. Hence, they can meet their local and regional demand.
They use local and readily available resources which helps the economy fully utilise natural resources with minimum wastage.
SSI’s are a major source of employment for developing countries like India. Because of the limited technology and resource availability, they tend to use labour and manpower for their production activities.
These enterprises account for almost 40% of the total production of goods and services in India. They are one of the main reasons for the growth and strengthening of the economy.
SSI’s are the best examples for the Make in India initiative. They focus on the mission to manufacture in India and sell the products worldwide. This also helps create more demands from all over the world.
India’s export industry majorly relies on these small industries for their growth and development. Nearly half of the goods that are exported from India are manufactured or produced by these industries.
These industries have an opportunity to earn wealth and create employment. SSIs are also important for the social growth and development of our country.
SSI acts as the seedbed for Large Scale Industries (LSI) as it provides conducive conditions for the development and growth of entrepreneurs. Small enterprises require low investment and simple technology and use local resources to meet local demands through personal contacts. Thus, it creates scope for the growth and development of LSI.
The objectives of the small scale industries are:
SSI are primarily categorised into 3 types, based on the nature of work carried out, which are as follows:
The manufacturing industries manufacture finished goods for consumption or used further in processing. Some examples of such SSIs are food processing units, power looms, engineering units, etc.
Ancillary industries manufacture components for other manufacturers. These manufacturers then assemble the final product. Big companies manufacture finished goods, but they do not generally make all the parts themselves. The vendors of such big companies are ancillary industries.
Service-based industries are not involved in any kind of manufacturing products. They provide services such as repair, maintenance and upkeep of the products after-sales.
Other types of SSIs are as follows:
An SSI is considered as an export unit when the exporting is more than 50% of its production.
The cottage units are considered as SSIs when they do not involve a dedicated facility and are carried out within living spaces or houses of the owners.
An SSI is considered village industries when they are established in rural areas and are not part of the organised sector. Typically, these industries solely depend on human labour for production.
An entrepreneur should pass through the following stages for the establishment of an SSI:
An entrepreneur wishing to establish an SSI must first decide on the ownership structure of the SSI. The SSI can be established as a sole proprietorship firm, partnership or company.
Next, entrepreneurs must decide whether the SSI will venture into manufacturing or provide service, the product/product range that needs to be manufactured and the quantity of production of products or the service that will be provided.
The location must be selected where the unit is to be established. The size of the plot, exact site, covered and open area must be decided. Once the location is finalised, the SSI unit should be established in that location and the business operation can start. The location of the established unit will be the registered address/primary address of the SSI unit.
After the unit is established at the decided location, the SSI must obtain the Shop and Establishment Act registration, company registration, or partnership firm registration, as applicable. Once the registration is obtained, the establishment can start its business.
SSI/MSME registration can be applied at any time after the unit obtains the Shop and Establishment Act registration, company registration, or partnership firm registration. If SSI registration is applied before production, the turnover and investment details must be mentioned as zero in the registration application. If SSI registration is applied after the SSI units start production, then the turnover and investment details will be automatically filled in the registration application from the ITR of the unit.
The machinery and equipment required for manufacturing the chosen products or providing services have to be decided. The machinery and equipment with the latest technology must be procured and installed in the SSI unit.
The plot where the enterprise is located or SSI unit is established should have adequate power and water connections. If pollution board permissions are required, all such permissions from the respective authorities must be obtained for the SSI unit.
Once the machines and equipment are installed on the unit and the required permissions are obtained, the need for manpower arises to run them. The required manpower must be employed for starting and running the business unit.
Raw materials are important for running an enterprise. The manpower will require raw materials to work upon the installed machinery or equipment to manufacture or provide service.
After procuring the raw materials, the SSIs can start production of the products of the units. The products manufactured by the SSI can be sold in the market after considerable units are produced.
When the products are manufactured or services can be provided, the entrepreneurs must market their products or services to gain customers and grow business.
Before marketing the products, the product quality certification from the respective authorities such as BIS, AGMARK, HALLMARK, FSSAI, etc., must be obtained.
SSI registration is a registration provided by the Ministry of MSME. A business should obtain SSI registration in order to be eligible for a number of schemes, subsidies and other incentives provided by the Government to such SSI’s. SSI registration can be obtained online too.
SSI registration is provided by the Ministry of Micro, Small and Medium Enterprises (MSME) through the Directorate of Industries of the State Government. The main logic behind the SSI registration is to set up new SSI businesses in India. SSI registration helps the business to be eligible for a number of subsidies given by the Government. We can get SSI/MSME registration online through Udyam Registration. Let’s look at the process of SSI/MSME registration online:
If a person wants to get registration for more than one industry then also he/she can opt for an individual SSI registration. The documents required for the SSI registration are the Aadhaar number and PAN number. No registration fees are required for the registration.
SSI registration can be obtained for enterprises that are considered as micro and small enterprises under the MSME Act, 2006.
A micro enterprise is an enterprise whose investment in plant, machinery and equipment does not exceed Rs.1 crore, and turnover does not exceed Rs.5 crore.
A small enterprise is an enterprise whose investment in plant, machinery and equipment does not exceed Rs.10 crore, and turnover does not exceed Rs.50 crore.
Several administrative bodies were established under the Ministry of Small Scale Industries and the Ministry of Agro and Rural Industries to help sustain and encourage SSIs. However, after these two Ministries merged into the Ministry of MSME, all of the SSIs are administered by the Ministry of MSME. The following are the government administrative bodies that are operating under the Ministry of MSMEs to provide help to the SSIs:
Yes. Earlier industries that manufactured goods, produced goods and provided services on a small scale or micro-scale were granted Small Scale Industries (SSI) registration. Subsequently, the government passed the MSME (Micro, Small and Medium Enterprises) Act in 2006. The small and micro industries came under the MSME Act. Thus, both SSI and MSME are the same. The government broadened the scope of the SSI and termed it as MSME.
The Ministry of MSME issues the SSI/MSME registration for small and micro industries. An individual must apply on the Udyam Registration portal to obtain SSI/MSME registration. Only the PAN card of the proprietor and the Aadhaar card is required for SSI registration.
On 9 May 2007, subsequent to an amendment of the Government of India (Allocation of Business) Rules, 1961, the Ministry of Small Scale Industries and the Ministry of Agro and Rural Industries were merged to form the Ministry of Micro, Small and Medium Enterprises. Thus, the SSIs are included under the Ministry of MSME now.
It is not mandatory to have a GST registration for obtaining an MSME/SSI registration when the enterprise is not covered under the GST act. If the enterprise requires GST registration under the GST Act, then such businesses need to mandatorily obtain GST registration for applying to SSI/MSME registration.
There are no fees for applying to the SSI registration. The MSME/SSI registration is free of cost.
Disclaimer: The materials provided herein are solely for information purposes. No attorney-client relationship is created when you access or use the site or the materials. The information presented on this site does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for legal advice from an attorney licensed in your state.
I am an advocate by profession and have a keen interest in writing. I write articles in various categories, from legal, business, personal finance, and investments to government schemes. I put words in a simplified manner and write easy-to-understand articles. Read more
Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.
Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.
CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.
Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.
Cleartax is a product by Defmacro Software Pvt. Ltd.
SSL Certified Site