India is in the process of growing as the largest market for producers and consumers due to its large population and geographical location in India. Further, India has realised the importance of strengthening small and medium scale enterprises in country to alleviate poverty MSME Registration, create employment opportunities and economic development of the nation on a wholesome level.
In recent years, MSME sector in India has grown dynamically making it one of key factors for the economic development of the country. Small and Medium enterprises make their contribution through creation of new jobs and expansion of the basis of GDP. Through establishment of MSMEs, traditional art & culture and artisans have been revived the artisan class of India through employment, access to easier loans, collateral –free loans and access to latest technology and trigger modernization of country.
MSMEs have also made possible to encourage industrialisation of rural & backward areas in the country, balancing regional disparities, and on a whole an assurance towards equitable distribution of national income & wealth in the country. Therefore, the contribution of MSMEs in economic development stands up to 30% to the country’s GDP, up to 45% in case of total manufacturing output of the country and approximately 48% of the country’s exports.
For encouraging entrepreneurship and industrial innovation, the Government of India has revised the definition of MSME enterprises, widening the definition and effective scope of industries falling under MSMEs effective from July 1, 2020 onwards. Accordingly, rather than using two different categories for registration of manufacturing and service enterprises, a common criterion has been developed for both manufacturing and service entities, dependent upon the capital investment and annual turnover has been provided under the definition of MSME.
Therefore, the applicable definition of MSME enterprises under the provisions of MSMED Act 2006, is provided below-
Enterprises undergoing Manufacturing/ rendering Services shall be known as a MSME enterprise where-
- Micro Enterprises- Business enterprises possessing an investment in Plant and machinery up to Rs. One Crores along with an annual turnover up to Rs. Five crores shall be considered as Micro Enterprises.
- Small Enterprises- Business Enterprises possessing an investment in Plant & Machinery up to Rs. Ten crores and the annual turnover up to Rs. Fifty crores, shall be considered as Small Enterprises.
- Medium Enterprises- Business Enterprises possessing an investment in Plant and Machinery /Equipment up to Rs. Fifty crores and the annual turnover up to Two hundred and fifty crores, shall be considered as Medium Enterprises.
MSME Registration with Legalmart
The whole process of MSME registration is a simple and hassle-free, but requires application filling with precision, as not undertaking the same with care can lead to failure of application or requirement to file the form all again. Thus, for expert assistance in form filling and getting your MSME recognition successfully for your business, refer to Legalmart and get the same within 7 days of application submission.
Benefits of MSME Registration
Business enterprises who acquire MSME registration are eligible for innumerable benefits from the Government of India including grants, incentives, credit facilities, protection against delayed payments by buyers of goods/services and many more. Some of the key benefits include-
- Concession in Electricity Bills– Businesses entities having MSME registration are allowed to avail concession on electricity bills by way of an application made to the electricity department attached with MSME Registration Certificate.
- Exemption in Overdraft Interest- Businesses holding MSME Enterprises can seek reduction up to 1% in the interest rate related to Overdraft facilities.
- Easier availability of bank loans- In pursuance of MSME registration, MSME enterprises are allowed to the Credit Guarantee Fund Scheme (CGS) for MSME enterprises that intends to allow a collateral-free credit to the MSME enterprises that has been created through the efforts of the Ministry of Micro, Small and Medium Enterprises, Government of India and Small Industries Development Bank of India (SIDBI) for ensuring availability of either partial collateral or collateral-free loans for stressed MSME.
- Subsidy on Patent Registration – Business entities having MSME registration are allowed up to 50% concessions in the patent registration fees during the process of patent registration by making an application for patent registration.
- Reimbursement in ISO certifications – Enterprises holding MSME registrations are allowed to reimburse expenses expended in obtaining ISO certification for their goods or services.
- Tax Benefits – Depending on the level of business activity MSME are granted exemptions from the direct tax payments for the first year of business.
- Market assistance and Export Promotion: Business enterprises holding MSME registration are offered assistance and encouragement from the Government by way or organization of numerous exchange programs, fairs, exhibitions, and trade-events in India. Further, business entities are also allowed incentives for making export of goods and services through subsidies in payments, exemption in taxes, and technical support.
- Industrial Promotion Subsidy Eligibility– Enterprises holding MSME enterprises that meet eligibility criteria for subsidies from Industrial Promotion Department under the instructions of the Government of India.
- Protection against Payments – As MSME enterprises face challenges to compete with established larger corporations and enterprises, they are under pressure of delayed payments that could disturb the entire flow of their businesses. Thus, they have been provided protection against delayed payments under MSMED Act 2006. Accordingly, any buyer of the goods/services purchased from MSMEs registered under the Act, is required to make payment either on or before the agreed date of payment or within a period of 15 days from the date of acceptance of goods or services. In case there is delay beyond a period of 45 days from the date of acceptance or goods or services, such buyer shall be liable to pay an interest over such value of goods or services, which could be up to three times to the rate mandated by the Reserve Bank of India.
Disadvantages of MSME Registration
- Higher Interests- It is obvious to understand small & medium enterprises have limited capital and resources. Despite easier accessibility to loans, they struggle to repay loans and interests which keeps pilling up over time making it difficult them to repay and manage the business functions simultaneously, that is unlike in case of angel investment or bootstrapping.
- Tedious process of Loan application-Although, the rate of loan acceptability for MSMEs is higher, however the complete procedure from loan application to sanction is too tedious for MSMEs as they are asked to file forms and submit a long list of documents such as income tax returns, financials of the entity, bank account details etc. for the purpose of proving credibility of the lender.
- No Collateral Requirement –MSME enterprises are allowed to avail loans either with partial collateral or no collateral at all. Though this feature is of great advantage of MSMEs, however, banks and financial institutions generally find it risky to lend funds without any collateral due to high chance of such sum becoming a bad debt. Therefore, banks and financial institutions generally try to satisfy themselves of the ability of the enterprise to timely repay the loans through verification of the credit score of the applicant. Thus, an individual or enterprise who doesn’t possess good credit score has lesser chances of loan approval.
- Lack economies of scale– Small and Micro industries are the ones who have limited capital and limited resources. Further, they also lack innovative technologies and modern infrastructure. As a result of which, their production capacity is lesser and they cannot stand competition in the relevant market against larger corporations having established businesses. Hence, they are unable to enjoy economies of scale in terms of purchases, production and marketing.
- Provisions for Low wages – In general, most of the small scale industries use limited resources for production purposes and therefore pay lesser wages to the staff and workers. Further, problems like lack of adequate safety measures and proper training lead to frequent accidents and injuries which are though beneficial for workers, but causes increase in costs for medical expenses and compensation for the MSMEs.
- Incompetence – Due to a variety of problems like lack of infrastructure, lesser resources, lower skill-sets and lack of training facilities, small and medium enterprises suffer from inefficiency, which makes them unable to compete with larger corporations in the market.
- Overcrowding – Due to the encouragement and multiple incentives offered by the Government of India, there have been a large upsurge in MSME registrations. However, due to such tremendous increase in the number of MSME registrations, there have been problems such as intense competition between MSMEs for survival and overcrowding.
- Low capacity utilization – Lack of infrastructure, low skilled staff, financial troubles and pilling interests over loans makes MSMEs unable to utilize their full capacity as a consequence of which their productive capacity remains idle.
- Less innovation capacity: Again due to limited resources and infrastructure, MSMEs are unable to invest adequate time and resources in research and development or acquiring latest technologies for better quality and production. Therefore, the process of technological and production related upgradation remains slow and ultimately hinders quality of the products/ services, which are easily made available by larger businesses.
Eligibility for MSME Registration
Though all types of business entities meeting capital & turnover requirements are eligible to obtain MSME registration, but it is especially beneficial for small scale industries. As of now, MSME registration or Udyog Aadhaar Registration could be obtained by any of the following-
- Sole Proprietorship firm.
- A Partnership Firm.
- Limited Liability Partnership.
- Company(Private Limited/Limited/OPC).
- Hindu Undivided Family(HUF).
- Trust /Society/Co-operative Society.
- Others Business entity.
Document Required for MSME Registration
The process of MSME registration has been eased for facilitating ease of business and doesn’t need uploading documents. However, some information is to be filled in the form for which following documents shall be required form the end of sole proprietor or business owner-
- Duly filled form for MSME registration form.
- Scanned photograph of the sole proprietor/authorized officer of the business entity.
- Copy of Aadhaar card & PAN card of sole proprietor/ authorized officer of the business entity.
- Utility bills of the business(electricity/water bill provided form the municipality).
- Copy of Business PAN card.
- Copy of Business Establishment Certificate(MOA& AOA,LLP Deed/Partnership Deed).
- Bank Account Details along with Branch Details of the Business Account.
- Copy of Income Proof of the Business.
- Copy of ownership of property related documents registered address proof(i.e. sale deed/rent agreement/lease agreement).
- No Objection certificate in case of rented agreement.
- Any other document as required.
Online Process for MSME Registration
The process of MSME registration is a short and simple process for facilitating ease of registration of business as small & medium enterprises. There are two categories of registration for enterprises provided under Udyam portal for business enterprises including-
A. Businesses who do not have been registered as MSME yet or hold Entrepreneurship Memorandum-II.
B. Businesses who were earlier holding Udyog Aadhaar Memorandum (UAM).
Following is the step-by-step process for MSME registration–
A. Businesses who do not have been registered as MSME yet or hold Entrepreneurship Memorandum-II.
For business enterprises who possess entrepreneurship memorandum –II or who have not yet acquired MSME registration yet, are required to follow the process as followed below-
Step 1- Log on to the Udyam Registration portal provided for MSME registration and click “Registration for New Entrepreneurs who are not Registered yet as MSME or those with EM-II” out of the two options provided.
Step 2- Next, a form will open prompting you to fill the Aadhaar number of the sole proprietor or business owner and along with contact details like email & mobile number for registration and click “Validate and Generate OTP “ for starting the process of registration.
Step 3- Once the button has been pressed for “OTP generation & Validation” purposes, fill Type of organization and PAN number or the business organization and click “validation of PAN“ number which is then validated from the Government database.
Step 4- Next, fill all the details needed to be provided under the portal such as business entity registered address, GST details, Branch address details, bank details, Initial capital & investment, number of employees, types of products or services being offered, details of plants, machinery and equipment’s etc. It is to be noted that more than one category of goods/services could be chosen on the basis of NIC code prescribed for goods or services list.
Step 5- After filling all these details, the applicant will click submit button under option “Submit & Final OTP”. Once final submission is done, the concerned MSME form shall be submitted for verification purposes and on satisfaction of the government authority, an Udyam Registration Certificate is issued which could be downloaded from the portal.
ii. Registration for Entrepreneurs Already Having UAM:
Step 1- For those businesses or entrepreneurs holding Udyog Aadhaar Memorandum, the businesses need to log on to Udyam Portal and need to click “Business enterprises possessing UAM” on the options presented under Udyam Registration Portal for registration purposes.
Step 2- Next, you will find a page where you will be required to prompt Udyog Aadhaar Number and obtain an OTP, on the mobile number and email provided under UAM.
Step 3- On choosing OTP, click “Validate and Generate OTP” is required to be punched. On entering OTP, the process of MSME registration will be completed.
Why you Choose Legalmart?
We at Legalmart are committed to provide expert level assistance with our professional knowledge and years of experience in MSME registration, returns filling and MSME compliances from time to time. Further, we offer to provide following services in case you intend to apply for MSME registrations–
Preparation of Application & collection of documents
At Legalmart, We sincerely believe that managing the business as a business owner is a difficult task and inadequate knowledge about legal formalities could be hectic to perform on your own. Thus, at Legalmart we have an entire team of professionals having years of knowledge and expertise in the field of registration, and who undertake the process of registration, collect necessary documents and prepare your application ready to be submitted to the portal in an efficient manner.
End to End assistance in registration process
Once documents are collected, our professional experts will fill and submit application for approval with the concerned MSME department After which authorities will verify form and on being satisfied, issue MSME registration certificate. We are also open to 24*7 customer assistance or for entertaining any requisite queries about the process.
Fulfilment of MSME compliances
On registration, an applicant is expected to take note of the fact that a business enterprise holding MSME registration is subject to MSME returns and various other compliances. At Legalmart, we have our professional experts to help you for assistance in filling returns and compliances in a simple, quick and efficient manner at standard charges.