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For promoting entrepreneurship, the government provides special benefits to the small businesses in the form of subsidies and incentives. Also, banks give loans at concessional rates to set up these businesses. For availing those, the small businesses need to register under Micro, Small and Medium Enterprises (MSMEs) act.
If a business is registered under MSMEs act, it can avail several benefits like cheaper bank loans, tax benefits, preference during the tender process, and access to various schemes and incentives of government.
What are MSME Enterprises?
The Micro, Small and Medium Enterprises (MSME) sector plays a crucial role in the growth of the Indian economy. It makes a significant contribution towards India’s GDP, employment and exports. Further, this sector acts as a backbone of the Indian entrepreneurship.
Currently , MSMEs contribute close to 6.11% of the manufacturing GDP and 24.63% of the GDP from service activities. In addition to this, 33.4% of India’s manufacturing output comes from the MSME sector, providing employment to around 120 million people and contributing around 45% of the overall exports from India.
Since 20% of the MSMEs operate out of rural areas, it provides employment to a huge chunk of rural workforce. Thus, MSME sector plays an important role in boosting sustainable and inclusive development thereby reducing regional disparity and ensuring equitable distribution of national income and wealth.
Thus, in order to provide benefits such as trouble free access to finance and promoting ease of doing business, Udyog Aadhaar was introduced by the Ministry of MSME.
MSME enterprises of manufacturing sector can be categorized on the basis of amount invested in plant and machinery –
• Micro enterprises– Entities investing less than ₹ 25 lakhs in plant and machinery
• Small enterprises– Entities investing between ₹ 25 lakhs and ₹ 5 crores in plant and machinery
• Medium enterprises– Entities investing between ₹ 5 crores and ₹ 10 crores in plant and machinery
MSME enterprises in the service sector can be categorized on the basis of amount invested in equipment-
• Micro enterprises– Entities investing less than ₹ 10 lakhs
• Small enterprises– Entities investing more than ₹ 10 lakhs but less than ₹ 2 crores
• Medium enterprises– Entities investing ₹ 2 crores but less than ₹ 5 crores
What all it requires to be registered as MSME?
It is an online process that requires your Aadhar number to get it certified. One can avail the certificate online without any need of the physical copy. Moreover, the process is simplified even further for the enterprises having the MSME Certificate to obtain licenses, approvals and registrations in any field for their business from their respective authorities. Such that they can produce the Certificate of MSME Registration while making an application itself. Not just that, applicants can reimburse the ISO Certificate Expenses by making an application to the respective authority supported by MSME Certificates.
Benefits of MSME
Some main benefits of MSME registration are: Cheaper bank loans because of much lower interest rates (around 1% to 1.5%) as compared to regular loans Various tax rebates are offered especially to MSMEs Credit for Minimum Alternate Tax (MAT) allowed to be carried forward up to 15 years (as opposed to regular 10 years) Several government tenders especially open to MSME Easily accessible credit Reduced costs of getting patented, industry set-up, etc. due to special availability of rebates and concessions Higher preference given to registered MSMEs for license and certification by government One Time Settlement Fee for amount unpaid by MSME
Documents Required for MSME Registration
In order to register an MSME, the following documents are required:
• Address Proof of Business
• Self-owned premises: Possession letter, allotment letter, property tax receipt, or lease deed
• Rented premises: Rent receipt, NOC from landlord, and utility bill or its equivalent as evidence to landlord’s ownership.
• Partnership Deed/Memorandum of Association (MoA) and Articles of Association (AoA) along with certificate of incorporation
• Copy of board resolution which has authorized a director to sign the MSME application