The Micro Small & Medium Enterprises (MSMEs) are defined in India under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. It was established to promote, facilitate, and develop the businesses of the micro, small and medium enterprises.
In a developing country like India, MSME industries are the backbone of the economy or engine of growth. The Government of India has come out with various subsidies, schemes, and incentive programs through the various circular, regulations, etc. MSMEs are small-sized businesses in terms of their Capital Investment.
In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified into two Classes:
1. Manufacturing Enterprises: The Enterprises engaged in the manufacturing or production of goods in any industry specified in the first schedule to the industries under Development and Regulation Act, 1951, and Enterprises employing plant and machinery in the process of value addition to the final product having a different character.
Investment in plant and machinery guidelines for MSME in manufacturing:
|Enterprises||Investment in Plant & Machinery|
|Micro||Does not exceed Rs. 25 lakh|
|Small||More than Rs. 25 lakh but does not exceed Rs. 5 crore|
|Medium||More than Rs. 5 crore but does not exceed Rs. 10 crore|
2. Service Enterprises: The enterprises engaged in providing or rendering services that are specified in terms of investment in equipment.
Investment in equipment guidelines for MSME in Service Enterprises:
|Enterprises||Investment in Equipment|
|Micro||Does not exceed Rs. 10 lakh|
|Small||More than Rs.10 lakh but does not exceed Rs. 2 crore|
|Medium||More than Rs. 2 crore but does not exceed Rs. 5 crore|
In October 2019, Union Minister Nitin Gadkari said that “The revised definition of micro, small, and medium enterprises may grant a unified description for all things related to taxation, investment, and more. The definition is to be implemented via an amendment that can further refine the business scenario for Indian enterprises.”
The Union Cabinet had approved the amendment to change the basis to classify MSMEs from “investment in plant and machinery” to “annual turnover.”
According to an article by Anil Bharadwaj, Secretary-General of the Federation of Indian Micro Small & Medium Enterprises (FISME), there will be no difference between the manufacturing and service sectors.
Amendment of Section 7 of the MSMED Act approved by Union Cabinet as follows, to enhance ease of doing business. The new conditions are as follows:
|Micro||Less than or equal to Rs. 5 crore|
|Small||More than Rs. 5 crore but does not exceed Rs. 75 crore|
|Medium||More than Rs. 75 crore but does not exceed Rs. 250 crore|
The Government is to have a final meeting to implement the change.
If the Company is in the manufacturing line or the service line, registrations for both areas can get through the MSMED Act. This registration is not yet made mandatory by the Government but it is beneficial to get one’s business registered under this because it provides a lot of benefits in terms of taxation, setting up the business, credit facilities, loans, etc.
Registration Process of MSME
- The owner has to fill a single form which he can do online as well as offline under the registration of the small and medium scale enterprises.
- If a person wants to do registration for more than one industry then the owner can do individual registration.
- The KYC document required for the registration is personal aadhaar number, industry name, address, bank account details, and some common information.
- There are no registration fees required for this process.
- Once the detail-filled and upload you would be getting the registration number.
Benefits of MSME
- Tax rebate offered to MSME.
- At the time of MSME registration, the bank loan interest rate is very low around 1% to 1.5%.
- Subsidy on Trademark or Patent Registration.
- Registered businesses under MSME get easy access to credit.
- There is an one-time settlement fee for non-paid amounts of MSME.
- There are many government tenders that are only open to the MSME Industries.
- MSME businesses are given a higher preference for government license and certification.
- Protection against delayed payment.