MSME Registration

Government RegistrationMSME

Can Startups Benefit From MSME Registration For Better Govt Support?

calendar18 Apr, 2020
timeReading Time: 4 Minutes
MSME Registration Benefit

The Micro-Small and Medium Enterprises (MSME) is primarily defined in terms of their investment size. In the context of the manufacturing sector, the MSMEs are basically categorized by the investment made in the plant for service sector organizations. 

These types of companies play a significant role in the economy by employing a good volume of unskilled and semi-skilled people. Their contribution to the economy is quite substantial in terms of employment, export, and output.

Previously, Indian MSMEs were deemed less prominent from the rest of the world, but after the advent of the MSMED Act, the business has transformed into a competitive entity. It is essential to note down that an MSME registration is imperative to avail the advantage of MSMED Act,

The MSME packs tons of benefits for the small scale enterprise, few of them are mentioned below.

Benefits from the Banking Sector:

The string of banks and financial institutions across the country duly recognize MSMEs and prepares rich schemes for them that serve seamless commercialization. This radically results in priority sector lending under which the company can expect quick sanctioning of a loan with a lower rate of interest. There is also a place for preferential treatment in the context of repayment delay.

  • Tax Benefits

Based on the type of business, MSMEs can avail exemptions in regards to central excise and direct taxes in the initial years of its operation.

  • Benefits from State Governments

MSMEs operating under MSMED Act can avail privileges on sales tax and other subsidies levied by the state government. 

  • Subsidy on Patent Registration

The MSME certified enterprises are entitled to reap the subsidy on patent registration. One has to apply to the respective ministry via an application for the registration purpose.

  • Overdraft Interest Rate Exemption

The enterprises under the shadow of MSME can avail benefit of 1% on Over Draft that varies from bank to bank.

  • Industrial Promotion Subsidy Eligibility
  • Fewer Electricity Bills

Enterprises with MSME accreditation can avail subsidy for Industrial Promotion, as suggested by the Government.

This liberty is given to all the Enterprises that work under the MSME Registration Certificate. To avail of this benefit, one has to submit an application to the electricity department along with the MSME registration certification. 

Benefits from Central Government:

MSMEs also availed advantages from the schemes offered by the Central Government. Registering an MSME is a simple and straightforward process. When contrasted with other entity formation, the documentation related to MSME is comparatively less tedious and cumbersome.

The following documents will be required for initiation for MSME:

  • Rent Agreement or Sales Deed.
  • Canceled Cheque and the bank statement.
  • Aadhar Card, Passport, and Pan Card.
  • MSME Registration

MSME represents micro, small, and medium enterprises. Being a prominent driver of the economy, MSME ensures equitable development for all. Compare to the large corporates, MSME Enterprises are labor-intensive and render enormous employment potential at a little capital cost.

MSME also share a major chunk of the industrial production and exports in India. It is now pushing the development of the industrial economy to the new heights.

Therefore, to trigger the development of the MSMEs, the MSMED Act[1] facilitates the development of businesses through many incentives, subsidies, and schemes.

To reap the advantage of the MSMED Act, MSME Registration is an absolute necessity.  The Act encompasses ranges of firms under its belt for registration such as:

  • Proprietorship firms
  • Private Limited Company
  • Partnership firms
  • Public Limited Companies
  • LLPs

Read our article:Udyog Aadhar Registration: Application Process, Documents and Fees

MSME Registrations Types

Provisional MSME Registration-

Provisional Registration generally granted during the Pre- Investment period of the unit. This registration renders the benefits like:

  • To get facilities for approvals, accommodation, and land.
  • To avail clearances and NOCs from regulatory bodies.

Permanent MSME Registration-

Permanent Registration Granted to an existing unit working in an industrial sector and to get various benefits like:

  • Tax exemption.
  • Price and purchase preference for goods produced.

MSME enterprises are the stepping stone to a healthy economy, and after the advent of the MSMED Act, these enterprises have got a global stature. 

There are a plethora of items which fall in the category of Micro and Small Enterprises (MSEs); these are as follow:

Pickles and chutneys, mustard oil, bread, groundnut oil, registers, and exercise books. Wooden furniture, candles, safety matches, laundry soap, fireworks, glass bangles, agarbattis, steel almirahs, and aluminum utensils.

Though the items mentioned above reserved for MSMEs, they can also produce by medium or large units. But there is an exception to that.  These units need to comply with the minimum criteria of export, i:e, 50% of the annual production of the MSE reserved items.

MSME sector has easy access to credit as a financial institution is required to ensure that a prominent part of their lending is made to these companies.

Apart from the credits to the small enterprise sector, 60% reserved for micro-enterprises and 40% for small enterprises. Lending to Micro and Small enterprises are given more priority than lending to medium enterprises.

Under the (NMCP) to improve the prowess of the SMEs sector (MSME) is employing scheme “Building Awareness on Intellectual Property Rights (IPR)” for the MSME.

The scheme has prepared with a motto is to boost up the awareness of MSME regarding Intellectual Property Rights (IPRs) to set provision for protecting their business strategies. Therefore, to support the MSME sector to tackle the challenges of liberalization, several activities on IPR are being employed under this scheme.

Conclusion

It can be concluded that the MSMED Act is a boom to the economy, and it probably gets supported by some additional schemes from the Central Government. Ultimately, this would lead to faster development of the economy and make the MSMEs more competitive.

Read our article: RBI Extends Deadline for One – Time Restructuring of MSME Loans

Pankaj Tyagi

Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.

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