MSME Registration - An Overview
Since Independence in India, the Khadi and Village industry (KVI) has flourished. The MSME sector in India is developing at a rapid pace. This industry helps in promoting employment opportunities in rural and backward areas.
In India the Khadi and Village Industries (KVI) is common which provides wealth of employment opportunities in the agriculture sector. The basic needs of processed goods are provided through this sector. Apart from this, employment opportunities are developed at a fast pace.
The Coir industry is an agro-based sector which originated in Kerala. Since its origination, this sector has spread its prominence throughout India. Apart from this, many organisations and MSMEs utilise these opportunities to carry out exports from India. Hence these sectors have been developed and through the incorporation of the MSME entity, such areas have been promoted further.
The MSMED Act, 2006 (Micro, Small and Medium Enterprises Development Act) came into existence to address different issues pertaining to policy development and improvement of this sector. There is a particular ministry authorising all the activities of MSME. This ministry is known as the Ministry of Micro, Small and Medium Enterprises (M/o MSME)
What are the functions of the ministry (MSME REGISTRATION)?
Apart from looking after the formation of MSMEs, the ministry also takes prudence in handling all the below activities:
The ministry of MSME ensures that proper credit flow is present in this sector.
The ministry ensures that digitisation and technology are utilised properly in this sector to contribute to different form of activities.
Apart from the above the ministry also ensures that infrastructural capability is present in these sectors.
The ministry also provides quality assurance and certification related to procedures and processes which are utilised in this sector.
Develop Technology Process
Along with technology development, the ministry will ensure that technology processes throughout the systems in this sector is developed.
Skill up Gradation
Promoting development, skills and entrepreneurship is one of the main motives of this ministry. Through various programs, promotion of development of industries can be achieved.
Development and Product Design
For MSME registration, the government will also assist by providing programs for development of designs and other processes.
What is the meaning of Micro Small and Medium Enterprise?
Under the MSME registration process, there are different forms of small scale industries. Under MSME registration process, there is Micro, Small and Medium Enterprises. All small scale industries present under this are considered as MSME.
There are different eligibility criteria for qualifying for as Micro, Small and a Medium enterprise. The turnover would determine the type of registration required for a particular entity under the MSME registration process. The Finance ministry has amended this turnover criteria several times. On 01 June 2020, the Finance ministry revised the criteria for turnover to be eligible under MSME registration.
Turnover Criteria for MSME Registration
The following revised turnover ratios indicate the criteria for a particular type of MSME:
Any enterprise or entity would be classified as a Micro-enterprise, if the investment in plant and machinery is not more than Rs. 1 Crore and the turnover is not more than Rs. 5 Crore.
Any enterprise or entity would be classified as a small enterprise, if the investment in plant and machinery is not more than Rs. 10 Crore and the turnover is not more than Rs. 50 Crore.
Any enterprise or entity would be classified as a Medium enterprise, if the investment in plant and machinery is not more than Rs. 50 Crore and the turnover is not more than Rs. 250 Crore.
As per the government, this notification has come into effect on 01 July 2020. Hence all enterprises should satisfy the above turnover criteria to be classified under the definition of Micro, Small and Medium Enterprises.
Regulatory Body/ Authority for MSME Registration
The primary regulatory body for MSME registration process is the Ministry of MSME. Apart from this institution, the office of development commissioner of the MSME is authorised by the Additional Secretary and Development Commissioner (MSME).
Apart from this above, there are additional bodies which look after the developments of their respective sector. Such bodies will include the following:
Khadi and Village Industries Commission
This looks into the activities related to Khadi and Village Industries on a national basis.
The Coir board looks into the activities of the Coir industry. Apart from this regulation is also governed under this sector.
National Small Industries Corporation Limited (NSIC)
This organisation was established mainly to promote the activities related to developments of Micro, Small and Medium Enterprises in India.
MSME Benefits- How is MSME Registration beneficial?
MSMEs can easily secure loans. This would become seamless, once an MSME is registered with the relevant authorities.
MSMEs can claim different form of tax exemptions and rebates which are provided by the government.
Minimum Alternative Tax (MAT)
Registered MSMEs have the benefits to carry forward minimum alternative tax for 15 years. Usually this benefit is only for 10 years.
Registered MSMEs would have access to government contracts and tenders. It is easier to secure a tender for a registered MSME, as they would have authenticity. Apart from this, registered MSMEs would be notified by the relevant authority regarding a tender.
Ease of Credit
It is easier to secure a different form of credit facilities from financial entities. Hence MSME which are registered have this benefit. Hence MSME registration is required for securing faster credit.
Higher benefits from Government
Registered MSMEs have more benefits when it comes to government facilities. Not only the government but even the general public would have more confidence and faith in a registered MSME when compared to an unregistered MSME.
Opportunities for Growth
MSME registration provides more opportunities in terms of diversification. An individual, who considers MSME registration, would get more recognition. Apart from this, registered MSMEs would be recognised when it comes to international commercial conventions and export oriented fairs.
Registered MSMEs would also secure the benefits of collateral free loans. Usually loans provided to MSMEs would be of a minimum value of less than Rs 10 lakhs. Banks would not require any form of collateral for any loan value below the above amount.
Through MSME registration, an individual can secure the benefits of ISO certification process. Apart from this, all MSMEs which are registered as per the requirement would get any form of reimbursement for ISO certification.
Hence if an individual wants the above benefits, then MSME registration process is required.
Which Entity can apply for MSME Registration Process?
The following entities can apply for the MSME registration process:
Any business which has an individual carrying out and managing the affairs can apply for the MSME registration.
A partnership is a formed of business entity where two or more individuals have an agreement to share the profits of the business. The business of a partnership can apply for the MSME registration process.
Limited Liability Partnership
A limited liability partnership is governed by the provisions of the limited liability partnership act, 2008 (LLP Act 2008). The statuses of the partners are limited to the amount of contribution made by the partnership. LLPs can apply for MSME registration process.
Any company which is engaged in activities related to producing agriculture produce is known as a producer company. Such companies are present under section 465(1) of the provisions of the Companies Act, 2013. As agricultural activities are one of the main activities of MSMEs, hence this form can go for the above registration.
Private Limited Company
Any company which is registered under the Companies Act, 2013 or previous company law 1956 can engage in activities of an MSME.
Hindu Undivided Family
An HUF would have a karta as the manager of the HUF. Apart from the Karta, there are other members of the HUF. A HUF can do MSME registration.
One Person Company
An entity which is registered as a one person company can go for the process of MSME registration.
Any entity which is registered under the Co-operative societies act can go for MSME registration.
Eligibility Criteria for MSME Registration Online
The entity wanting to register as an MSME must meet the turnover criteria as specified above.
Compliance under MSMED Act
Apart from the above, the investor or the owner is required to invest more than Rs. 20 Crore and the turnover must be lesser than 100 Crore. This requirement of turnover lesser than 100 Crore is as per the amendment in May 2020. This turnover has to be in the plant and machinery either for the manufacturing sector or the service sector.
How to Apply for MSME Registration/ Udyam Registration?
Fill the Application Form
The process of MSME registration can either be carried out offline or online. The applicant would have to fill in the application form with all details. After filing the application form the requisite documentation have to be prepared.
In the next step, the applicant is required to submit all the requisite documentation for the MSME application. All information asked for should be submitted as per the requirements for MSME registration. It takes about three working days for the documentation to be processed.
Submit the Application
After providing the documents; the applicant is required to submit the same. Usually this would take about two to three working days for submitting the documentation. When the documents are submitted, the authority will verify the same along with the application.
Issuance of Certificate
In the final step, the authority will verify the documentation. If all the documents meet the requirement of verification, the same will be accepted. The certificate of registration will be issued to the applicant.
- In an RBI update released in August 2020 all enterprises are required to obtain the udyog registration certificate. Lenders would require to take the udyog registration certificate from all entrepreneurs
- Udyog Memorandum and Udyog Aadhaar Memorandum of the MSMEs obtained till June 30, 2020 shall remain valid till March 31, 2021. All enterprises under the MSME which are registered till June 30, 2020 would require filing the new registration (Udyam Registration) in the portal before March 31, 2020.
- The Value of Plant and Machinery must be according to the Written down Value as per the requirements.
Documents Required for MSME Registration Process
- PAN Card Details/ Information of the members of the organisation or the entity.
- Aadhar Card Details of all the members of the organisation.
- Proof of ownership – Either through some form of agreement, utility bills, leased document or property documents of the premises.
- If in case the place being used is a rented premises then the proof of the payment of utility bills must be provided. Apart from this, a No Objection Certificate is required to be submitted to the authority.
- Copy of Purchase Bill of every capital goods and raw materials purchased.
- Copies of Sale Bills of all the products that are sold.
- Copy of the Partnership Deed in case the firm is a partnership entity or a limited liability partnership.
- Memorandum of Association of the company.
- Articles of Association of the company.
- Copy of the resolutions undertaken in shareholders and board meeting.
- Copies of any permits or industrial licenses required under the respective acts.
- An affidavit on Rs. 10/-Non-Judicial Stamp Paper. This must be attested and notarised by a judicial officer.
- Purchase Bill of the Machinery Installed.
- Bills relating to Purchasing and Installation of plant and machinery.
- Information of Accounting and Bank Account Statement.