MSME Registration

Introduction

MSME stands for Micro, Small and Medium Enterprises. In a developing country like India, MSME industries are the backbone of the economy. When these industries grow, the economy of the country grows as a whole and flourishes. This sector is the job creator as well as plays a crucial role in providing large-scale employment and industrialization of rural and backward areas. These industries are also known as small-scale industries or SSI’s.

Even if the Company is in the manufacturing line or the service line, registrations for both these areas can be obtained through the MSME 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.

The MSME became operational on October 02, 2006. It was established to promote, facilitate and develop the competitiveness of the micro, small and medium enterprises.

What is MSME or SSI?

Previously the existing MSME classification was based on the criteria of investment in plant and machinery or equipment. So, to enjoy the MSME benefits, the MSMEs have to limit their investment to a lower limit, as mentioned below:

Existing MSME Classification
SectorCriteriaMicroSmallMedium
ManufacturingInvestment< Rs.25 lakh< Rs.5 crore< Rs.10 crore
ServicesInvestment< Rs.10 lakh< Rs.2 crore< Rs.5 crore

These lower limits were killing the urge to grow as they were unable to scale their businesses further. Also, there had been a long-pending demand for the revision of MSME classification so that they can further expand their operations while continuing to avail the MSME benefits.

Now, under the Aatmanirbhar Bharat Abhiyan (ABA), the government revised the MSME classification by inserting composite criteria of both investment and annual turnover. Also, the distinction between the manufacturing and the services sectors under the MSME definition was removed. The following is the current revised MSME classification, where the investment and annual turnover are to be considered for deciding an MSME.

Revised MSME Classification
CriteriaMicroSmallMedium
Investment & Annual Turnover< Rs.1 crore & < Rs.5 crore< Rs.10 crore & < Rs.50 crore< Rs.50 crore & < Rs.250 crore

What Are The Different Types of MSMEs?

There are 3 types of MSME or SSIs which can be classified as under:

Micro Enterprises

Micro-enterprises are the smallest entities, of course. The investment under Micro manufacturing enterprises should be less than Rs. 25 lakhs in plant and machinery, whereas, the micro service enterprises should not exceed Rs. 10 lakhs investment.

Small Enterprises

In small manufacturing enterprises, the investment should be in between Rs. 25 lakh and Rs. 5 crores in plant and machinery, while in small service enterprises this investment limits between Rs. 10 lakh and Rs. 2 crores.

Medium Enterprises

And if we’ll talk about the Medium manufacturing enterprises, then the investment should be in between Rs. 5 crore and Rs. 10 crores in plant and machinery, and for small service enterprises it should be in between Rs. 2 crore and Rs. 5 crores.

MSME Registration Procedure

MSME registration is completely online. MSME online registration is to be done in the government portal of udyamregistration.gov.in. The registration of MSMEs can be done under the following two categories in the portal –

  1. For New Entrepreneurs who are not Registered yet as MSME or those with EM-II and
  2. For those having registration as UAM and For those already having registration as UAM through Assisted filing

For New Entrepreneurs who are not Registered yet as MSME or those with EM-II

  1. New entrepreneurs and entrepreneurs having EM-II registration need to click the button “For New Entrepreneurs who are not Registered yet as MSME or those with EM-II” shown on the home page for registering MSME. New registration of MSME is done by entering the Aadhaar card number and PAN number.
  2. When clicked on the “For New Entrepreneurs who are not Registered yet as MSME or those with EM-II” button on the homepage of the government portal, it opens the page for registration and asks to enter the Aadhaar number and the name of the entrepreneur. After entering these details, “Validate and Generate OTP Button” is to be clicked. Once, this button is clicked and OTP is received and entered, the PAN Verification page opens.
  3. The entrepreneur must enter the “Type of Organisation” and the PAN Number and click on the “Validate PAN” button. The portal gets the PAN details from the government databases and validates the PAN number of the entrepreneur.
  4. After verification of PAN, the Udyam Registration form will appear and the entrepreneurs need to fill the personal details and details of the plant or industry.
  5. Once the details on the MSME registration form are filled, the “Submit and Get Final OTP” button is to be clicked. The MSME online registration process will be completed and a message of successful registration with reference number will appear. Note down the reference number for future use. After verification of MSME registration form, which may take a few days, the Udyam Registration Certificate is issued.

Registration For Entrepreneurs Already Having UAM

  1. For those already having registration as UAM, they need to click the button “For those having registration as UAM” or “For those already having registration as UAM through Assisted filing” shown on the home page of the government portal. This will open a page where Udyog Aadhaar Number is to be entered and an OTP option should be selected.
  2. The options provided are to obtain OTP on mobile as filled in UAM or obtain OTP on email as filled UAM. After choosing the OTP Options, “Validate and Generate OTP” is to be clicked. After entering OTP, registration details are to be filled on the MSME registration form and Udyam registration will be complete.

Documents Required for MSME Registration

  1. Aadhaar Card
  2. PAN Card

GST is not compulsory for enterprises that do not require a GST registration under the GST law. However, the enterprises that need to compulsorily obtain GST registration under the GST regime need to have GST registration for obtaining Udyam Registration.

Those who have UAM registration or any other registration issued by any authority under the Ministry of MSME, will have to re-register themselves in the Udyam Registration Portal by clicking on the “For New Entrepreneurs who are not Registered yet as MSME or those with EM-II”.

The enterprises having UAM registration need to migrate to Udyam Registration by 31/12/2021. If the entrepreneurs having UAM registration do not migrate to Udyam Registration by 31/12/2021, the UAM registration will be invalid and they will not be able to receive the benefits provided to the MSMEs.

MSME Registration Fees

The MSME Registration can be obtained by applying only on the Udyam portal. There are no fees charged for filling and submitting the MSME registration form. The MSME registration is totally free on the Udyam portal.

MSME Registration Certificate

After submitting the MSME registration form online, a message of successful registration with a reference number will appear. The Ministry of MSME will issue the Udyam Registration certificate or MSME certificate to the email ID of the entrepreneur after verification of the registration form submitted on the portal.

The Ministry will issue the MSME certificate after a few days from the submission of the registration form. The MSME registration certificate validity is for a lifetime. Thus, it requires no renewal. 

Get MSME Certificate Online

The entrepreneurs can also download the MSME certificate online by visiting the Udyam Registration portal. The process to get the MSME registration certificate online is as follows:

  • On the homepage of the portal, the entrepreneurs have to click on the ‘Print/Verify’ tab and click on the ‘Print Udyam Certificate’ option.
  • The next page will open where the entrepreneurs have to enter the Udyam Registration Number, mobile number, choose the OTP option and click on the ‘Validate and Generate OTP’ button.
  • Enter the OTP received on the mobile number or email ID and click on the ‘Validate OTP and Print’ button.

The MSME registration certificate will appear and you can print the MSME registration certificate from the page. An entrepreneur can check the MSME registration number from the reference number given after the submission of the MSME registration form.

For getting the MSME registration number, an entrepreneur needs to click on the ‘Verify Udyam Registration Number’ option under the ‘Print/Verify’ tab on the homepage. A new page will open and the entrepreneurs have to enter the reference number, captcha code and click on ‘Verify’ button. The details of the MSME along with the MSME registration number will appear on the screen.

MSME schemes launched by the Government are:

  • Prime Minister Employment Generation Programme and Other Credit Support Schemes – 
  • Prime Minister Employment Generation Programme(PMEGP)
  • Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE)
  • Interest Subsidy Eligibility Certificate (ISEC)
  • Development of Khadi, Village and Coir Industries –
    • Science and Technology Scheme
    • Market Promotion & Development Scheme (MPDA)
    • Revamped Scheme Of Fund for Regeneration Of Traditional Industries (SFURTI)
    • Coir Vikas Yojana (CVY)
  • Technology Upgradation and Quality Certification –
    • Financial Support to MSMEs in ZED Certification Scheme
    • A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship (ASPIRE)
    • National Manufacturing Competitiveness Programme (NMCP):
  • Credit Linked Capital Subsidy for Technology Upgradation
  • Marketing Support/Assistance to MSMEs (Bar Code)
  • Lean Manufacturing Competitiveness for MSMEs
  • Design Clinic for Design Expertise to MSMEs
  • Technology and Quality Upgradation Support to MSMEs
  • Entrepreneurial and Managerial Development of SMEs through Incubators
  • Enabling Manufacturing Sector to be Competitive through QMS&QTT
  • Building Awareness on Intellectual Property Rights (IPR)
  • Marketing Promotion Schemes –
    • International Cooperation
    • Marketing Assistance Scheme
    • Procurement and Marketing Support Scheme (P&MS)
  • Entrepreneurship and skill Development Programme –
    • Entrepreneurship Skill Development Programme (ESDP)
    • Assistance to Training Institutions (ATI)
  • Micro & Small Enterprises Cluster Development (MSE-CDP)
  • Scheme of Surveys, Studies and Policy Research
  • National SC-ST-HUB
  • Scheme of Information, Education and Communication

Advantages of MSME Registration

  1. Cheaper bank loans: The rate of interest on loan offered to MSMEs is 1-1.5% lower compared to typical business loan interest.
  2. Easy access to credit: PM Modi has introduced the Mudhra Loan scheme, which provides loans to MSME / SSI without collaterals.
  3. Quicker approvals from state and central government bodies: Businesses registered under MSME are given higher preference in terms of government license and certification.
  4. Tax rebates: MSME / SSI registered businesses enjoy multiple income taxes and capital gains tax subsidies from the government.
  5. Cheaper infrastructure: Charges are lower for MSME registered company for facilities such as electricity and VAT exemptions. In fact, other business services such as patents are also cheaper for MSMEs.
  6. Access to tenders: There are multiple government tenders which are open only to MSMEs to promote small business participation in the India.
  7. It also allowed credit for minimum alternate tax (MAT) to be carried forward for up to 15 years instead of 10 years
  8. Once registered the cost of getting a patent done, or the cost of setting up the industry reduces as many rebates and concessions are available.
  9. MSME registration helps to acquire government tenders easily as Udyam Registration Portal is integrated with Government e-Marketplace and various other State Government portals which give easy access to their marketplace and e-tenders.
  10. There is a One Time Settlement Fee for non-paid amounts of MSME.
  11. The Udyam Registration will help the MSMEs in availing the benefits of government schemes such as Credit Guarantee Scheme, Credit Linked Capital Subsidy Scheme, Public Procurement Policy, Protection against delayed payments, etc.
  12. MSMEs get the benefit of a government security deposit waiver that is helpful while participating in e-tenders.
  13. Any number of activities including service or manufacturing or both may be added or specified in one Registration.
  14. Barcode registration subsidy.
  15. Exemption scheme from Direct taxes.
  16. ISO certification fees reimbursement.
  17. Electricity bills concession.
  18. Special consideration in International trade fairs.

Frequently Asked Questions (FAQs)

  1. How do we get MSME Registration?

Ans. Although, there is no compulsion to get MSME registration but is always advised to do so as it provides lots of benefits to the enterprises registered under MSME Act. It will save you from a lot of inconveniences later on. After assigning you the Provisional MSME Certificate and you can begin with your production and even apply for a Permanent Certificate which will add more advantages for you. Always apply for provisional registration at an initial stage of the business.

  1. Is SSI/MSME Registration voluntary or mandatory?

Ans. SSI/MSME registration is totally voluntary. Businessmen and entrepreneurs usually get this done to utilise the advantages offered under it. The registration process is quite easy and simple. You can easily avail it (provided you have a manufacturing plant or a commercial space where you render services), many businesses opt for it over other registrations.

  1. Why should I apply before commencing operations?

Ans. It is advisable to get a Provisional SSI Registration Certificate (PRC) before starting your operation in your enterprise. The PRC will work smoothly for you and will help you out with particular NOCs and clearances from regulatory bodies.

  1. What documents are required for the application?

Ans. If your business or enterprise is listed under Schedule –III of Industrial Licensing Exemption Notification, then you can easily apply for PRC without an industrial license. Other units must first acquire an industrial license. All the clearances should be obtained by enterprise whether it is statutory or administrative. For example, a drug license under the drug control order, if required. The PRC is issued based on the application form. No field enquiry is made.

  1. For how long is an MSME Provisional Registration Certificate (PRC) valid?

Ans. The validation of a PRC is for 5 years and if the unit is still not under operational then you may still re-apply for it. As soon as you start with your operations, you can easily apply for the Permanent License

  1. How does SSI/MSME help me get a loan from a bank?

Ans. MSMEs are recognised by all the institutions and banks. Special schemes are drafted to recognise them as well. Banks prefer MSMEs instead of normal enterprises to lend loans. The possibility of getting a sanctioned loan is much higher in a case of MSME. Bank loan interest rates will also be lower. There may also be preferential treatment in case of delay in repayment.

  1. What benefits are given to MSME by state and central government?

Ans. Many state governments prefer enterprises which are registered under MSMED Act. Subsidy such as on power, taxes, and much more is offered by state governments. In most of the states, sales tax exemption is provided purchase preferences is given on goods produced. The enterprise may also relish excise exemption scheme and exemption from certain direct taxes in the initial years of your business.

  1. How is the value of plant and machinery computed for SSI registration?

Ans. While computing the value of Plant and Machinery, only original value is asked to be taken into account as per the MSME notification.

  1. What is the support available for collateral free borrowing?

Ans. Certain trust such as Credit Guarantee Fund Trust has been set up by Ministry of MSME, Government of India and SIDBI, so that there won’t be any breakage in the flow of credit to the MSE sector without any interference from the third party. The scheme is solidified on the basis that the lender should give importance to project viability and secure the credit facility purely on the primary security of the assets financed.

Cluster based approach to lending is intended to provide a full-service approach to cater to the diverse needs of the MSE sector which may be achieved through extending banking services to recognised MSE clusters.

The banks have, therefore, been advised to treat it as a thrust area and increasingly adopt the same for SME financing. Banks are always asked to take appropriate steps so that the flow of credit is smoothly done to the identified clusters of micro and small entrepreneurs from the Minorities Communities residing in the minority concentrated districts of the country.

The CGTMSE would provide cover for credit facility up to Rs. 100 lakh which have been extended by lending institutions without any collateral security. A nominal annual fee is charged by the CGTMSE to avail of the guarantee cover.

  1. What is credit rating and why is it mandatory?

Ans. Credit rating is an estimate to figure out the capability of an enterprise to meet all the financial needs based on the previous year dealings. Although credit rating is not compulsive but it is in the interest of the MSE borrowers to get their credit rating done as it would help in credit pricing of the loans taken by them from banks.

  1. Is MSME updated to Udyam Registration?

Ans. Yes, MSME registration has been replaced with the Udyam Registration. If any micro, small and medium industries want to start any business; they need to do the registration with MSME/Udyam Registration. This registration with MSME/Udyam Registration is completely online. This facility provides the business with a lot of benefits and subsidies.

  1. Is aadhar card compulsory?

Ans. Yes. For registration under the Udyam registration, an Aadhaar card is compulsory. In case an applicant is other than the proprietor, the Aadhaar card of the partner and the director will be required.

  1. Can existing and new businesses both apply?

Ans. Yes, an existing and new business can apply for MSME/Udyam Registration, provided the existing unit is functioning and meets the threshold limits for registration. UAM Registration has to be re-registered for Udyam registration to avail the benefits of MSME.

  1. What is the validity of the certificate?

Ans. There is no expiry of the Udyam Registration Certificate. As long as the entity is ethical and financially healthy there will be no expiry of the certificate.

  1. Can trading companies register under MSME?

Ans. No. MSME covers only manufacturing and service industries. Trading companies are not covered by the scheme. MSME is to support startups with subsidies and benefits, trading companies are just like middlemen, a link between manufacturer and customer. Hence, not covered under the scheme.

  1. Do I need multiple registrations for manufacturing plants in different cities?

Ans. No. The MSME/Udyam Registration Certificate is for a single entity irrespective of multiple branches or plants. However, information about multiple branches or plants must be furnished.