All about MSME Registration

“A big business starts small”. Yes, all the leading businesses in this world once started it small and humble. But being a common man, we are hesitant to become entrepreneur because of various risks involved with it. But there is no need to compromise on our dreams of becoming an entrepreneur because there is something called as MSMED Act 2006 of the Parliament of India act to all small-scale entrepreneurs. Let’s learn more about MSME and how to get benefitted by MSMED act in this article.

What is MSME?

MSME stands for Micro, Small and Medium enterprises. MSME can be regarded as a backbone of economy in a developing country like India.

Which are the entities that can be classified as MSME?

Till recently the criteria for classifying an entity as MSME was based on Investment in Plant and machinery of equipment. So to enjoy MSME benefits, the MSMEs have to limit their investment to a lower limit, as mentioned below:

Old criteria for MSME recognition.

Sector	Criteria	Micro	Small	Medium
Manufacturing	Investment	< Rs.25 lakh	< Rs.5 crore	< Rs.10 crore
Services	Investment	< Rs.10 lakh	< Rs.2 crore	< < Rs.5 crore

Old criteria for recognition as MSME business.

As evident from the above lower limits which stunts the urge to grow, as MSMEs are unable to scale their businesses , there has been a long pending demand for the revision of the above limits so that they can expand their operations while continuing to avail MSME benefits.

Aatmanirbhar Bharat Abhiyan (ABA)” a good news to MSME

“An entrepreneur is a farmer with a seed of an idea. Feed the idea and give it a chance to grow”. That’s exactly what “Aatmanirbhar Bharat Abhiyan” is doing to MSME sector as part of covid relief measures.

Under this scheme Government of India revised the MSME classification by inserting a composite criterion of both Investment + Annual Turnover. Also, the distinction between manufacturing and the service sectors under the MSME definition has been removed. The new limits under “ABA” are mentioned below in which both investment and turnover are to be taken into consideration.

Criteria	Micro	Small	Medium
Investment & Annual Turnover	< Rs.1 crore & < Rs.5 crore	< Rs.10 crore & < Rs.50 crore	< Rs.50 crore & < Rs.250 crore

Revised MSME classification

What are the benefits I get by registering my business under MSMED Act ?act?

Registration under MSMED act is very simple but its benefits are numerous for our businesses. Lets understand what all benefits we get by registering our business under MSMED act:

• MSME registration helps in getting government tenders.

• Bank loans become cheaper as the interest rate is very low around 1% to 1.5%. Much lower than interest on regular loans.

• There are various tax rebates offered to MSME.

• They get easy access to credit.

• It also allowed credit for minimum alternate tax (MAT) to be carried forward up to 15 years instead of 10 years.

• Becomes easy to get licenses, approvals and registrations, irrespective of field of business.

• Any buyer who fails to make payment to MSMEs, as per agreed terms or a maximum of 45 days, would be liable to pay monthly compounded interest at 3 times the bank rate notified by RBI. This will eliminate the blockage of working capital.

What are the documents I need to submit to register my business under MSME?

MSME registration and obtaining Udyog Adhaar is one and the same. Following documents are required to register the business under MSME:

• Business Address proof- (Self owned- allotment letter, possession letter, lease deed or property tax receipt, Rented– Rent receipt, NOC from landlord and any utility bill evidencing the landlord to be owner of the property)

• Copies of Sale bill or purchase bill (Sale bill- w.r.t products sold by MSME, purchase bill-w.r.t raw material purchased by MSME).

• Partnership deed / MOA and AOA (Partnership deed and registration certificate (if registered) in case the business is a partnership firm, MOA & AOA in case the business is run through a company)

• Copy of Licenses and Bills of Machinery purchased- (In few cases industrial license obtained from govt of India has to be submitted. Bills w.r.t purchase and installation of machinery is required to be submitted in all cases).

What are procedures I need to follow to register my business as MSME?

MSME registration can be done online. One has to visit www.udyamregistration.gov.in and fill online registration form requiring details such as adhar number, industry name, address, bank account details and some common information.

If a person wants to register for more than one industry, then he/she can register each industry individually.

There are no registration fees involved in the process.

Once the details filled and uploaded you will be getting the registration number. The registration certificate will be issued after verification.

Which are the activities excluded under MSME?

Forest and Logging.

Fishing and aquaculture.

Wholesale, retail trade and repair of motor vehicle and motorcycles

Wholesale trade except for motor vehicles and motorcycles.

Retail Trade Except of Motor Vehicles and motor cycles.

Activities of households as employees for domestic personnel.

Undifferentiated goods and services producing activities of private households for own.

Activities of extraterritorial organisations and bodies. As the quote on MSME website “Our Small hands to make you LARGE” suggests,MSMEs even though small in size will contribute to the economic development of the country to a large extent as well as encourage the budding entrepreneurs with high business ambitions.

Written By:
CA Swetha S V
[Partner at NRSR & Co, Manipal]
Date: 01-05-2022
Time: 10:00:00