Small Scale Industries (SSI) – Characteristics, Objectives, Registration of SSI

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.

Introduction of SSI

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.

Characteristics of SSI

Ownership

SSI’s generally are under single ownership. So it can either be a sole proprietorship or sometimes a partnership firm.

Management

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.

Labor Intensive

SSI’s dependence on technology is pretty limited. Hence they tend to use labour and manpower for their production activities.

Flexibility

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.

Limited Reach

Small scale industries have a restricted zone of operations. Hence, they can meet their local and regional demand.

Resources Utilisation

They use local and readily available resources which helps the economy fully utilise natural resources with minimum wastage.

Role in the Indian Economy

Employment

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.

Total Production

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.

Make in India

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.

Export Contribution

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.

Public Welfare

These industries have an opportunity to earn wealth and create employment. SSIs are also important for the social growth and development of our country.

Seedbed for Large Scale Industries

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. 

Objectives of SSI

The objectives of the small scale industries are:

• To create more employment opportunities.
• To help develop the rural and less developed regions of the economy.
• To reduce regional imbalances.
• To ensure optimum utilisation of unexploited resources of the country.
• To improve the standard of living of people.
• To ensure equal distribution of income and wealth.
• To solve the unemployment problem.
• To attain self-reliance.
• To adopt the latest technology aimed at producing better quality products at lower costs.

Types of SSI

SSI are primarily categorised into 3 types, based on the nature of work carried out, which are as follows:

Manufacturing Industries

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

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 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:

Export Units

An SSI is considered as an export unit when the exporting is more than 50% of its production. 

Cottage Units

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. 

Village Industries

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.

Examples and Ideas of SSIs in India

• Bakeries
• School stationeries
• Water bottles
• Leather belt
• Small toys
• Paper Bags
• Photography
• Beauty parlours 
• Spinning and weaving industry
• Coconut oil making
• Cashew nut processing
• Clay products
• Agarbatti making
• Chalk making
• Biodiesel production
• Rice mill
• Toys making
• Honey processing
• Slippers making
• Detergent powder making
• Spices making
• Chocolate making
• Water bottles manufacturing
• Toothprick making
• Xerox and printing
• Pickle manufacturing industry
• Incense stick manufacturing industry
• Paper plate manufacturing industry
• Candle manufacturing

Pre-requisites for Establishing SSI

An entrepreneur should pass through the following stages for the establishment of an SSI:

• Decision on the Ownership 

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.

• Product Selection 

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.

• Location 

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.

• Registration 

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 Registration

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.

• Machinery and Equipment  

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.

• Power and Water Connection

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.

• Recruitment of Manpower

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.

• Procurement of Raw Materials

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.

• Production 

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.

• Marketing 

When the products are manufactured or services can be provided, the entrepreneurs must market their products or services to gain customers and grow business. 

• Quality Assurance

Before marketing the products, the product quality certification from the respective authorities such as BIS, AGMARK, HALLMARK, FSSAI, etc., must be obtained.

Registration of SSI

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.

Overview of SSI Registration

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:

• Visit the Udaym Registration portal and click on the “For New Entrepreneurs who are not Registered yet as MSME or those with EM-II”.

• Fill in your “Aadhaar Number” and “Name of the Entrepreneur” and click on the “Validate and Generate OTP” button.

• You will receive OTP to your mobile number. Enter OPT on the PAN verification page will open. Enter PAN details and click on the “PAN 
  Validate” button.

• The Udyam Registration page will open. Fill in all the personal details and industry details such as industry name, address, bank account details and some common information and click on the “Submit and Get Final OTP” button.

• With this the MSME registration is complete and a message of successful registration with a reference number will appear. After verification of registration, the MSME Registration Certificate is issued.

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.

Eligibility Criteria for SSI 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.

Benefits of obtaining SSI Registration

• There are various tax rebates offered to SSI’s.
• A credit for Minimum Alternate Tax (MAT) is allowed to be carried forward for up to 15 years instead of 10 years.
• There are many government tenders that are only open to the SSI.
• Easy access to credit as banks and financial institutions offer many loan schemes for small businesses.
• Once registered the cost of acquiring a patent, or the cost of setting up the industry reduces as many rebates and concessions are available.
• Businesses registered as SSI are given a higher preference for government licenses and certification.
• SSIs can obtain collateral-free automatic loans for the purchase of raw materials, fulfilling operational liabilities or restarting the business.
• There are several government schemes that provide support to SSIs. These schemes are listed below:
  • Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) provides institutional credit to small scale industries.
  • Credit Linked Capital Subsidy Scheme (CLCSS) is an extension of credit for the upgradation of technology in SSIs.
  • Market Promotion and Development Scheme (MPDA) helps SSIs to set up marketing complexes or khadi plazas to expand the marketing network of Khadi and Gram Udyog products.
  • Coir Vikas Yojana (CVY) scheme envisages a wide range of activities like skill development of artisans, mahila coir yojana, upgrading and establishing a new unit under Coir Industry Technology Upgradation Scheme (CITUS), promoting the domestic as well as an export market, providing of trade and industry-related functional support services, and welfare of coir workers.
  • International Cooperation Scheme arranges for delegations to other countries for exploring technology upgradation, facilitating buyer-seller meets in foreign states.
  • Marketing Assistance Scheme allows for arranging overseas exhibitions, campaigns and other promotional activities.
  • Procurement and Marketing Support Scheme aims at improving the domestic markets and promoting new market access.
  • Entrepreneurship Skill Development Programme scheme aims to develop entrepreneurial skills in youth who are keen on setting up SSIs.

Administrative Bodies for SSIs

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:

• Office of Development Commissioner (MSME)
• Khadi Village Industries Commission (KVIC)
• Coir Board
• National Small Industries Corporation Limited (NSIC)
• National Institute for Micro, Small and Medium Enterprises (NIMSME)

Frequently Asked Questions

Are SSI and MSME the same?

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.

What are the documents required to apply for SSI registration?

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.

When did SSI and MSME become one?

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.

Do I need a GST registration to apply for SSI registration?

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.

What are the fees for SSI 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.

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