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MSME Udyam Registration in India- Benefits: Process: Documents

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Micro, Small, and Medium Enterprises (MSMEs) are crucial in the Indian economy. After agriculture, they are the most significant employment providers in India. In terms of Employment generation, exports, and Gross Domestic Product (GDP), they contribute significantly to the Indian Economy.

In January 2024, during a speech at the World Economic Forum in Davos, RBI Governor Shaktikanta Das stated that he expected India’s GDP growth to reach 7% in FY25. He based this prediction on India’s strong momentum of economic activity.

The International Monetary Fund (IMF) has raised India’s growth projection for 2024-25 (FY25) to 6.5% in its World Economic Outlook (WEO) update, citing solid spending and improved global growth prospects. 

In this blog, we’ll learn about the various topics related to MSMEs that will help one to register their enterprises under MSME Udyam Registration.

  1. Definition
  2. Classification
  3. Key Features
  4. Government Laws
  5. Government Schemes
  6. Registration Process
  7. Benefits of the Registration Process
  8. Disadvantages
  9. Conclusion

Definition:

MSME stands for Micro, Small, and Medium Enterprises. This term refers to businesses that fall within specific size criteria, typically in annual turnover and plant, machinery, or equipment investment. They generally aim to classify businesses based on their scale of operations.

Classification of MSME:

The Government of India classifies these enterprises based on their investment in plant & machinery or equipment and turnover.

  1. Investment in Plant and Machinery or Equipment: This criterion refers to the amount invested in purchasing or acquiring machinery, equipment, or other fixed assets used in the business.
  2. Annual Turnover: It refers to the total revenue generated by the business within a financial year.
Type of Enterprises Investment in plant and machinery or equipment Turnover
Micro Not exceeding INR 1 Crore (10 million)   Not Exceeding INR 5 crores (50 Million)
Small More than INR 1 Crore (10 million) but Not exceeding INR 10 Crores (100 Million) More than INR 5 crores (50 Million) but Not Exceeding INR 50 crores (500 Million)  
Medium More than INR 10 Crore (100 million) but Not exceeding INR 50 Crores (500 Million) More than INR 50 crores (500 Million) but Not Exceeding INR 250 crores (250 Billion)  

Key Features:

Here are some key features of their significance:

Employment Generation: In India, MSMEs are major/significant contributors to employment generation. They create numerous job opportunities, especially in rural and semi-urban areas, thus helping alleviate poverty and inclusive growth.

Contribution to GDP: MSMEs considerably contribute to India’s Gross Domestic Product (GDP). Their collective output significantly impacts the country’s overall economic performance.

Promotion of Entrepreneurship. MSMEs foster entrepreneurship by providing opportunities for individuals to start and run their businesses with relatively lower capital investments. They act as accelerators for innovation and creativity.

Regional Development: MSMEs play a vital role in developing backward and rural areas by establishing industries and providing employment opportunities. They also help reduce inequality in regional economic development.

Exports and Foreign Exchange Earnings: Many MSMEs in India are engaged in export-oriented activities. They contribute to the country’s foreign exchange earnings by exporting goods and services to various international markets.

Adoption of Technology and Innovation: MSMEs use tech and innovation to boost productivity and competitiveness and play a vital role in diffusing technology across sectors.

Diversification of Industrial Base:  MSMEs diversify and strengthen the economy through manufacturing, services, and agriculture involvement.

Support for Large Industries: MSMEs are crucial to the supply chain for large industries, providing intermediate goods, components, and services.

Governing Law:

The governing law for MSMEs in India is primarily defined by the Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006. The Parliament of India enacted this Act to facilitate the promotion and development of MSMEs in the country.

The Act defines MSMEs based on plant and machinery or equipment investment and turnover.

Key provisions of the MSMED Act, 2006 include:

  1. Registration of MSMEs: It allows for the voluntary registration of MSMEs with the appropriate authorities. Registration facilitates access to various government benefits and incentives.
  2. Credit facilities: Mandates timely payment of dues by buyers to MSMEs for goods and services procured from them. It also encourages banks and financial institutions to provide credit facilities to MSMEs, including collateral-free loans.
  3. Government support: It outlines various measures and schemes to support the growth and development of MSMEs, including subsidies, incentives, and assistance for upgrading technology and marketing.
  4. Dispute resolution: Provides establishment of Micro and Small Enterprises Facilitation Councils (MSEFCs) at the central and state levels to address disputes related to delayed payments and other grievances of MSMEs.

In addition to the MSMED Act, various other laws, regulations, and policies also impact MSMEs in India, including labor laws, taxation laws, environmental regulations, and industrial policies. The government regularly updates laws and policies to meet the country’s evolving needs and challenges of MSMEs.

Government Schemes:

The Government of India has introduced several schemes and initiatives to support the Micro, Small, and Medium Enterprises (MSMEs) sector. Some of these schemes include:

  1. Prime Minister’s Employment Generation Programme (PMEGP): This scheme aims to generate employment opportunities in rural and urban areas by promoting self-employment ventures and establishing micro-enterprises. It facilitates financial assistance for setting up new projects or expanding existing ones.
  2. Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE): This scheme provides micro and small enterprises with collateral-free credit facilities. The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) guarantees banks and financial institutions loans up to a specific limit, encouraging lending to MSMEs without collateral.   
  3. Technology Upgradation Fund Scheme (TUFS): TUFS aims to facilitate technology upgradation in the textile and jute industries by providing subsidized loans for modernizing machinery and equipment.
  4. Credit Linked Capital Subsidy Scheme (CLCSS): CLCSS provides a capital subsidy to MSMEs for upgrading and modernizing their plant and machinery with the latest technology, enhancing their competitiveness.
  5. National Small Industries Corporation (NSIC) Single Point Registration Scheme: MSMEs can register under this scheme to avail of benefits such as exemption from payment of Earnest Money Deposit (EMD), tender document cost, and eligibility for government purchases.
  6. Scheme of Fund for Regeneration of Traditional Industries (SFURTI): SFURTI aims to enhance the competitiveness of traditional industries by providing support for the cluster-based development of such industries. It includes infrastructure development, capacity building, and market linkages.
  7. Udyog Aadhaar Memorandum (UAM) Registration: MSMEs can register online through the Udyog Aadhaar Memorandum (UAM) portal to avail of benefits like priority sector lending, subsidies, and concessions under government schemes.

    Other schemes that benefit for MSMEs are:

    • Quality of Technology Support Institutions and Programs
    • Promotional Services Institutions and Program
    • MSME Clusters Development Program and MSME Growth Poles
    • Credit Support Program
    • MDA Program
    • Upgradation of Data Base

These are just a few examples of the numerous schemes and initiatives that the Government of India introduced to support MSMEs and promote their growth and development in the country.

Registration Process:

MSME registration can be done online on the portal www.udyamregistration.gov.in under two categories:

  1. For new entrepreneurs who are not registered yet as MSME or those with EM-II and
  2. It is for those already registered as UAM and those already registered as UAM through assisted filing.

Udyam Registration is a free, digitalized, paperless process requiring no document uploads. Anyone can register their enterprise. After completing the registration process, an e-certificate, the “Udyam Registration Certificate,” will be issued online. This certificate has a dynamic QR Code, and one can access the web page on the portal, where details about the enterprise can be accessed.

The online system is integrated with Income Tax and Goods and Service Tax Identification Number (GSTIN) systems; details on enterprises’ investments and turnover are automatically taken from government databases. When calculating turnover, exports are not considered. No enterprise is required to file more than one Udyam Registration. However, any activities, including manufacturing, service, or both, may be specified or added to one registration.

Process of registration of UDYAM:

  1. Go to Udyam Registration Portal: The registration process of MSMEs is now done online through the Udyam Registration Portal www.udyamregistration.gov.in.
  2. Online filling out the form: The Udyam Registration portal’s homepage has an option to register. Click on it and you will be directed to the registration form.

    The registration form requires various details such as:

    • Aadhaar number of the applicant/entrepreneur
    • Name of the entrepreneur
    • Social category (General/SC/ST/OBC)
    • Gender
    • Name of the enterprise
    • Type of organization (Proprietorship/Partnership/Company/LLP)
    • PAN (Permanent Account Number)
    • GSTIN (in the case of a Company or a Limited Liability Partnership, a Cooperative Society or Society or a Trust)
    • Address of the enterprise
    • Date of commencement of business
    • Previous registration details (if any)
    • Bank account details
    • Significant activity (manufacturing/service)
    • NIC Code (National Industrial Classification) related to your business activity
  1. Verification: Once you fill in the details, the portal may require you to verify the information provided. This verification process usually involves the authentication of the Aadhaar number through an OTP (One-Time Password) sent to the registered mobile number linked with Aadhaar.
  2. Submission: After filling out and verifying the details, submit the registration forms. Upon submission, you’ll receive an acknowledgment containing a unique Udyam Registration Number (URN) as your MSME registration number.
  3. Downloading Registration Certificate: A registration certificate bearing the Udyam Registration Number and other details will be issued. Finally, the process is complete when the certificate is downloaded from the portal.

For new entrepreneurs who are not yet registered as MSME or those with EM-II, the steps are:

  • After choosing the option for new entrepreneurs not yet registered as MSME or those with EM-II, verify the aadhaar card no. & PAN no. through OTP.
  • Fill in relevant personal details and details of the business in the form.
  • Once all the details on the MSME registration form are filled in, submit and you will get final OTP, and button is to be clicked. Finally, the registration successful and reference no is generated. A message will be displayed on the screen.
  • The Udyam Registration Certificate is issued.

For those having registration as UAM and for those already having registration as UAM through assisted filing
“Udyog aadhaar” registration has been replaced with “Udyam registration”. Udyam registration is the new process launched by the Ministry of Micro, Small, and Medium Enterprises for MSME/Udyog Aadhaar registration, effective July 1, 2020.

The steps are:

  • After choosing the option for those registering as UAM and those already registering as UAM through assisted filing, fill in details of the duplicate aadhaar as of UAM and verify OTP on mobile or email ID.
  • Fill in the relevant details in the MSME registration form, and it completes the registration process.

Benefits of Registration:

The Udyam Registration helps MSMEs availing the benefits of Schemes of the Ministry of MSMEs, such as the Credit Guarantee Scheme, Public Procurement Policy, an additional edge in Government Tenders, & Protection against delayed payments. They become eligible for priority sector lending from Banks.

  1. Collateral-Free Bank Loans: The Indian government has implemented policies to provide collateral-free credit access to small and micro-businesses. These initiatives offer financial support to both new and established enterprises. The Small Industries Development Bank of India (SIDBI), the Ministry of Micro, Small, and Medium Enterprises, and the Indian government have established the Credit Guarantee Trust Fund Scheme to support all Micro and Small Enterprises.
  2. Subsidy on Patent Registration: MSMEs benefit from a 50% subsidy on their patent registration fees. This subsidy encourages small businesses and firms to keep innovating and working on new projects and technologies, availing from respective ministries by applying for it.
  3. Reimbursement of ISO registration charges: To motivate Micro, Small, and Medium Enterprises to get their respective businesses ISO certified, which helps them to do business abroad in terms of high-quality exports, a scheme of reimbursement of expenses incurred on ISO registration was launched.
  4. Interest rate exemption on overdrafts: MSMEs can avail themselves of 1% benefit on the overdraft in a scheme that differs from bank to bank.
  5. Protection against delayed payments: The Finance Act 2023 introduced significant changes by inserting clause (h) into Section 43B of the Income Tax Act, 1961. This amendment strengthens the enforcement of MSME payment regulations and aims to promote timely payments to MSMEs, disallowing expenses if payments are not made within the specified time limit.
  6. A credit of Minimum Alternate Tax: Units Registered under MSME are allowed to credit for MAT to be carried forward for upto 15 years instead of 10 years in other cases.

Disadvantages

There are certain disadvantages of MSMEs, which are as follows:

  • Difficulties in finding funding
    Although cheap loans are easily accessible to MSMEs, they do not enjoy substantial support. They do not have huge financial capital as compared to large corporations. MSMEs cannot wish to list themselves on stock markets and cannot also raise funds through short-term financial Instruments.
  • Higher costs
    MSMEs often find it a challenging task to attain economies of scale. Hence, they frequently struggle to adjust to the prices they plan to offer their customers or end-users. Generally, they do not tend to compete on prices.

    Access to a less-skilled workforce
    SMEs, in general, often fail to provide ample opportunities or possibilities for advancement. At certain times, young and fresh talent prioritizes the large enterprises over an SME. An SME may have to offer specific incentives to infuse young talent into the organizational workforce.

Conclusion:

MSMEs contribute to inclusive growth by providing opportunities for marginalized sections of the society, including women, rural populations, and disadvantaged communities, to participate in economic activities and improve their livelihoods.

Overall, MSMEs play an essential role in India’s economic development by fostering entrepreneurship, generating employment, promoting innovation, and contributing to exports and GDP growth. Their growth and success are crucial for the country’s sustainable, inclusive economic development.

At Mercurius, we assist our clients in MSME registration services, Gem registration, TREDs registration, updating details of MSME registered entities, and re-registration of UAM registered entities on the new portal, providing them with adequate support and guidance from our end. If you have any questions or wish to know more about MSME registration, kindly contact us.

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