MSME: Micro, Small, and Medium Enterprises
INTRODUCTION
MSME stands for Micro, Small, and Medium Enterprises. These are small businesses that typically have fewer employees, lower annual turnover, and smaller assets compared to larger companies. MSMEs play an important role in the economy of many countries, particularly in developing countries, by creating jobs and contributing to economic growth.
ELIGIBILITY CRITERIA OF MSME
The eligibility criteria for MSME classification in India are based on the investment in plant and machinery or equipment for manufacturing or service enterprises, respectively. The Government of India has recently revised the MSME classification criteria as follows:
Micro Enterprises :
The investment in plant and machinery or equipment should be up to Rs. 1 crore for manufacturing enterprises and up to Rs. 50 lakhs for service enterprises.
Small Enterprises :
The investment in plant and machinery or equipment should be more than Rs. 1 crore but not exceeding Rs. 10 crores for manufacturing enterprises and more than Rs. 50 lakhs but not exceeding Rs. 2 crores for service enterprises.
Medium Enterprises :
The investment in plant and machinery or equipment should be more than Rs. 10 crores but not exceeding Rs. 50 crores for manufacturing enterprises and more than Rs. 2 crores but not exceeding Rs. 5 crores for service enterprises.
Additionally, there are some other criteria that need to be fulfilled by an enterprise to be eligible for MSME registration:
- The enterprise should be a sole proprietorship, partnership, limited liability partnership, cooperative, private limited company, or any other type of entity recognized under the Indian Companies Act, 2013.
- The enterprise should not be engaged in any prohibited activity as per the guidelines issued by the Reserve Bank of India.
- The enterprise should have a valid Aadhaar number or any other official document issued by the government of India as proof of identity.
- The enterprise should be in compliance with all applicable laws and regulations, including tax laws, labour laws, and environmental laws.
ALL SCHEMES FOR MSME
The Government of India has launched several schemes to support and promote the growth of Micro, Small, and Medium Enterprises (MSMEs) in the country. Here are some of the prominent schemes for MSMEs:
- Prime Minister’s Employment Generation Programme (PMEGP): This scheme aims to create employment opportunities in rural as well as urban areas by providing financial assistance to start-ups and micro-enterprises. Under this scheme, beneficiaries can get loans of up to Rs. 25 lakhs for manufacturing activities and up to Rs. 10 lakhs for service activities.
- Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE): This scheme provides credit guarantee to the banks for loans given to MSMEs without any collateral security. The credit guarantee coverage is up to 75% of the loan amount, and the maximum loan amount covered is Rs. 2 crores.
- Micro and Small Enterprises Cluster Development Programme (MSE-CDP): This scheme aims to enhance the productivity and competitiveness of MSMEs by providing support for setting up common facilities, conducting training programmes, and promoting the adoption of new technologies.
- National Small Industries Corporation (NSIC) Single Point Registration Scheme: This scheme provides a platform for MSMEs to participate in government tenders. Once registered, MSMEs can get access to various government schemes and subsidies.
- Technology and Quality Upgradation Support to MSMEs: This scheme provides financial assistance to MSMEs for the adoption of modern technologies and for upgrading their quality standards.
- A Scheme for Promoting Innovation, Rural Industry and Entrepreneurship (ASPIRE): This scheme aims to promote innovation and entrepreneurship in the rural areas by providing financial assistance for setting up incubation centres, skill development training, and marketing support to MSMEs.
- National Manufacturing Competitiveness Programme (NMCP): This scheme aims to enhance the competitiveness of the manufacturing sector by providing support for the adoption of modern technologies, skill development, and capacity building of MSMEs.
It is important to note that these criteria may change from time to time, and it is advisable to check the latest criteria before applying for MSME registration
These are some of the prominent schemes for MSMEs in India. MSMEs can take advantage of these schemes to avail financial and other support for their growth and development.
EXEMPTION FOR MSME
The Government of India has provided various exemptions and benefits to MSMEs to support and encourage their growth. Here are some of the major exemptions for MSMEs:
- Priority sector lending: Banks and financial institutions have been mandated to allocate a certain percentage of their lending to the MSME sector. This ensures easy access to credit for MSMEs.
- Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE): This scheme provides credit guarantee to the banks for loans given to MSMEs without any collateral security. The credit guarantee coverage is up to 75% of the loan amount, and the maximum loan amount covered is Rs. 2 crores.
- Capital and interest subsidy: MSMEs can avail of subsidies for capital and interest under various schemes. For instance, under the Prime Minister’s Employment Generation Programme (PMEGP), the government provides a subsidy of up to 35% of the project cost for general category enterprises and up to 50% for SC/ST/women entrepreneurs.
- Income tax exemption: MSMEs are eligible for a 100% income tax exemption on profits for the first three years of their operation. After that, they can avail of a 30% reduction in tax liability.
- GST exemption: MSMEs with an annual turnover of up to Rs. 40 lakhs are exempt from paying GST. Along with that those with a turnover of Rs. up to 1.5 crores can opt for the Composition Scheme, which provides for a lower tax rate and reduced compliance requirements.
- Marketing and branding support: MSMEs can avail of marketing and branding support under various schemes, such as the Micro and Small Enterprises Cluster Development Programme (MSE-CDP).
These exemptions and benefits provide much-needed support to MSMEs in terms of access to credit, tax and regulatory compliance, and marketing support, among others.
STEPS TO REGISTER MSME
The following steps are involved in the registration of MSME:
- Visit the Udyog Aadhaar registration portal (https://udyogaadhaar.gov.in/UA/UAM_Registration.aspx).
- Enter your Aadhaar number and personal details, such as name, social category, gender, and disability status.
- Enter the name of your enterprise, its type, and the date of commencement of operations.
- Provide your bank account details, including the IFSC code.
- Provide the main business activity of the enterprise, including its National Industrial Classification (NIC) code.
- Enter the number of employees in the enterprise.
- Enter the investment made in plant and machinery or equipment, as per the revised MSME classification criteria.
- Confirm the details entered and submit the application.
On successful submission of the application, a unique Udyog Aadhaar Number (UAN) will be generated and sent to the registered mobile number and email address.
The registration of MSME is free of cost, and the process is entirely online. The registration can also be done without an Aadhaar card by providing a government-issued ID proof, such as the Voter ID card or passport. Once registered, an MSME can avail of various benefits and exemptions provided by the government. It is important to note that the registration of MSME is voluntary and not mandatory, but it is advisable to get registered to avail of the various benefits and schemes provided by the government.
