Registering an MSME

MSMEs are the backbone of the Indian economy. MSME sector contributes to 45% of India’s Total Industrial Employment, 50% of India’s Total Exports and 95% of all industrial units of the country. The sector provides a wide range of services and is engaged in the manufacturing of over 6,000 products – ranging from traditional to hi-tech items. Given the government’s various schemes and Make in India push, the Indian MSME sector is poised for rapid growth and integration with major global value chains. As per the official estimates, there are about 63.05 million micro industries, 0.33 million small, and about 5,000 medium enterprises in the country.
How does a business qualify as an MSME in India?

The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, governs the coverage and investment ceiling of MSMEs in India. The MSME Act became operational on October 02, 2006. It was established to promote, facilitate and develop the competitiveness of the micro, small and medium enterprises. With MSME Registration, banks also provide the loans at lower rate of interests, as MSMEs play an important role in the country’s economic growth

According to the Act, there are two categories of MSMEs in the country – manufacturing and services.Registrations for both these categories can be obtained through the MSME act. 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.

What are micro, small and medium enterprise?

MSME are classified into two categories:

1. Manufacturing enterprise

2. Service enterprise.

They are defined in term of investment in Plant and Machinery/ Equipment  as below

Micro Small Medium
Manufacturing Enterprises Less than
Rs 10,000,000
Less than
Rs 100,000,000
Less than
Rs 500,000,000
Service Enterprises Less than
Rs 50,000,000
Less than
Rs 500,000,000
Less than
Rs 2,500,000,000
MSME registration process
Udyam registration – Classification of MSMEs and procedure for registration

Click here to know more

Documents required for MSME registration

The entity has to submit documents like business address proof, copies of purchase and sale bill, and licenses from regulatory bodies.

  • Aadhar Card
  • Business Address Proof
  • Copies of Sale Bill and Purchase Bill
  • Partnership Deed/ MoA and AoA
  • Copy of Licenses and Bills of Machinery Purchased
Business address proof

If the premise is self-owned– Allotment letter, possession letter, lease deed or property tax receipt. If there is a municipal license in the business name or in the name of the proprietor, partner or director of the business, no other possession document is required to be submitted.

If the premise is rented– Rent receipt and a no objection certificate from the landlord is required. Also, any utility bill or document evidencing the landlord’s ownership is to be submitted.

Copies of sale bill and purchase bill

Business is required to submit a copy of sale bill related to each end product that it will supply. Also, for each raw material that it will purchase, a purchase bill has to be submitted.

Partnership Deed/ MoA and AoA

If the business is a partnership firm, it has to submit its partnership deed. If the partnership firm is registered, it has to submit registration certificate also.

In case of a company, a copy of Memorandum of Association and Articles of Association, and certificate of incorporation has to be submitted. With it, a copy of the resolution passed in general meeting, and the copy of board resolution authorizing a director to sign the MSME application is also to be submitted.

Copy of licenses and bills of machinery purchased

In few cases, the applicant has to submit a copy of industrial license which is to be obtained by giving an application to Govt. of India. Further, all bills and receipts related to purchase and installation of plant and machinery have to be kept safe and required to be submitted on demand.

Registration process for MSME
1. Start registration process

Click here to start the MSME Registration Process.

2. Fill application form

The entity needs to fill in basic details in MSME Registration form that will include all the necessary details of the business such as company name, registration number, GST number and so on.

4. Executive will process application

At this process, an MSME executive will review the application. In case of any discrepancy, the entity will be notified about the process and make the relevant changes.

5. Receive certificate of mail

After filling the complete form the entity will receive a certificate for MSME Registration. This will be a virtual certificate for MSME Registration. This is the process for the MSME registration for companies. Note that the entire registration process is free of cost. 

Benefits of MSME registration

The registration of MSME is not mandatory, but the registration process has been provided so that all entrepreneurs can maximize their benefits under this scheme and reap the offers provided by the government. The benefits are many; from priority, lending to cluster financing and an opportunity to adopt latest quality management standards.

1. 50% Subsidy on patent registration

If you have created something new, a new innovative product or business model and want to patent it, there is a hefty fee applied for patent registration. But with the help of MSME registration, one can avail the patent registration at 50% subsidy. This move aims to encourage more entrepreneurs to invent and innovate. They can avail the 50% subsidy by registering with their respective industry.

2. Collateral free loans

One of the biggest benefits of MSME registration is the collateral free loans one can avail through banks and NBFCs. This essentially means that SMEs and MSMEs can now take various loans such as working capital loan and credit line loan, without providing any collateral.

APPLY FOR MSME LOAN ONLINE
3. Exemption of interest on overdraft

MSMEs who have good credit history and have good relations with their banks can avail the overdraft facility. MSMEs get the advantage of 1% exemption on interest on overdraft facility. This could be extremely beneficial for MSMEs. However MSMEs should check with their lender as not all banks give this facility.

4. Reservation policy

As mentioned above one of the greatest things about the MSME market is that it has hardly been affected by outsiders. Due to this, the success of the MSME sector has been magnificent. A major part of this success is due to the reservation policy of the government. There are some MSME sectors who have been given exclusive rights to manufacture certain products. Under the Government Stores Purchase Program, the central government has reserved the purchase of more than 300 products exclusively from this sector. This gives a boost to the MSME market and it is not affected by stiff competition.

5. Technological upgradation for MSME’s

Some MSMEs may not be able to use their resources to full potential due to lack of sophisticated technology. The government, under the Capital Aid for Technological Upgradation Scheme, helps these enterprises to upgrade their equipment through latest technology by helping them get low-interest loans from banks. With the rise of technology, the government is encouraging more MSMEs to get into the space of technology through aid and financial support.

6. Protection against delayed payments

One of the major advantages of registering under the MSME scheme is the protection received by the government against delayed payments. This protection in delayed payments is against the buyers in the transaction of business. If any micro or small enterprise that has MSME registration, supplies any goods or services, then the buyer is required to make payment on or before the date agreed upon between the buyer and the micro or small enterprise. In case there is no payment date on the agreement, then the buyer is required to make payment within fifteen days of acceptance of goods or services. In case of delayed payment, the buyer is required to pay a fine to the MSME registered company. This helps most MSMEs to ensure they have no outstanding debtors or bad debts.