WHAT IS MSME?
The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 in terms of which the definition of micro, small and medium enterprises is as under:
Enterprises engaged in the manufacture or production, processing or preservation of goods as specified below:
1. A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh;
2. A small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore;
3. A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore.
In case of the above enterprises, investment in plant and machinery is the original cost excluding land and building and the items specified by the Ministry of Small Scale Industries.
Enterprises engaged in providing or rendering of services and whose investment in equipment (original cost excluding land and building and furniture, fittings and other items not directly related to the service rendered or as may be notified under the MSMED Act, 2006 are specified below.
1. A micro enterprise is an enterprise where the investment in equipment does not exceed Rs. 10 lakh;
2. A small enterprise is an enterprise where the investment in equipment is more than Rs.10 lakh but does not exceed Rs. 2 crore;
3. A medium enterprise is an enterprise where the investment in equipment is more than Rs. 2 crore but does not exceed Rs. 5 crore.
What are the benefits of MSME?
MSME stands for micro, small and medium enterprises, and these are the backbone of any developing economy. To support and promote MSMEs, the Government of India through various subsidies, schemes and incentives promote MSMEs through the MSME Act. To avail the benefits under the MSME Act from Central or State Government and the Banking Sector, MSME Registration is required.
The MSME registration is not statutory. However, the MSME registration process in India has been conceptualized to provide maximum benefits to all types of enterprises. After registration, any enterprise becomes qualified to reap the benefits offered under the MSMED Act. Some of the benefits from Central Government include easy sanction of bank loans (Priority sector lending), lower rates of interest, excise exemption scheme, exemption under Direct Tax Laws and statutory support such as reservation and the interest on Delayed Payments Act. State Government and Union Territories also have complied their own package of facilities and incentives for MSMEs. Some of the benefits provided by State Govenement for MSMEs include development of specialized industrial estates, tax subsidies, power tariff subsidies, capital investment subsidies and other support. Both the Centre and the State, whether under law or otherwise, target their incentives and support packages generally to units registered with them. Banking Laws, Excise Law and the Direct Taxes Law have incorporated the word MSME in their exemption notifications. Therefore, the registration certificate issued by the registering authority is seen as proof of being MSME and is required to avail the benefits sanctioned for MSMEs.MSME Definition
For Enterprises engaged in the manufacture or production, processing or preservation of goods, the definition is as follows:
• Micro Enterprise: An enterprise where investment in plant and machinery does not exceed Rs. 25 lakh. • Small Enterprise: An enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore. • Medium Enterprise: An enterprise where the investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore. In case of the above enterprises, investment in plant and machinery is the original cost excluding land and building and other items as specified by the Ministry of Small Scale Industries. For Enterprises engaged in providing or rendering of services, the definition is as follows: • Micro Enterprise: An enterprise where the investment in equipment does not exceed Rs. 10 lakh. Small Enterprise: An enterprise where the investment in equipment is more than Rs.10 lakh but does not exceed Rs. 2 crore. • Medium Enterprise: An enterprise where the investment in equipment is more than Rs. 2 crore but does not exceed Rs. 5 crore.What are MSME Enterprises?
MSME enterprises of manufacturing sector can be categorized on the basis of amount invested in plant and machinery – Micro enterprises– Entities investing less than 25 lakhs in plant and machinery Small enterprises– Entities investing between 25 lakhs and 5 crores in plant and machinery Medium enterprises– Entities investing between 5 crores and 10 crores in plant and machinery MSME enterprises of manufacturing sector can be categorized on the basis of amount invested in plant and machinery – Micro enterprises–Entities investing less than 10 lakhs Small enterprises–Entities investing more than 10 lakhs but less than 2 crores Medium enterprises–Entities investing 2 crores but less than 5 crores.
Registration Process
Aadhar number is now compulsory for registering under MSME act. An application is to be filed online using Udyog Aadhar Registration, and this can be verified using e-Aadhar OTP.
Provisional registration is given in the initial five years if an entity hasn’t started its business yet. During this period, it can obtain loans from banks, and apply for various NOCs from regulatory bodies. Once the entity commences its operations, it can apply for a permanent license which has a lifetime validity, unless canceled.
Documents Required
1. Business Address Proof
If the premise is self-owned– Allotment letter, possession letter, lease deed or property tax receipt. If there is a municipal license in the business name or in the name of the proprietor, partner or director of the business, no other possession document is required to be submitted.
If the premise is rented–Rent receipt and a no objection certificate from the landlord is required. Also, any utility bill or document evidencing the landlord’s ownership is to be submitted.
2. Copies of Sale Bill and Purchase Bill
Business is required to submit copy of sale bill related to each end product that it will supply. Also, for each raw material that it will purchase, a purchase bill has to be submitted.
3. Partnership Deed/ MoA and AoA
If the business is a partnership firm, it has to submit its partnership deed. If the partnership firm is registered, it has to submit registration certificate also.
In case of a company, copy of Memorandum of Association and Articles of Association, and certificate of incorporation has to be submitted. With it, copy of the resolution passed in general meeting, and a copy of board resolution authorizing a director to sign the MSME application is also to be submitted.
4. Copy of Licenses and Bills of Machinery Purchased
In few cases, the applicant has to submit a copy of industrial license which is to be obtained by giving an application to Govt. of India. Further, all bills and receipts related to purchase and installation of plant and machinery have to be kept safe and required to be submitted on demand.