Registration under MSME as Small/ Medium Scale Industries

The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.

MSME stands for micro, small and medium enterprises and any enterprise that falls under any of these three categories. MSME enterprises are the backbone of any economy and are an engine of economic growth, promoting equitable development for all. Therefore, to support and promote MSMEs, the Government of India through various subsidies, schemes and incentives promote MSMEs through the MSMED Act. To avail the benefits under the MSMED Act from Central or State Government and the Banking Sector, MSME Registration is required.

Micro, Small and Medium sized enterprises in both the manufacturing and service sector can obtain MSME Registration under the MSMED Act. Though the MSME registration is not statutory, it is beneficial for business at it provides a range of benefits such as eligibility for lower rates of interest, excise exemption scheme, tax subsidies, power tariff subsidies, capital investment subsidies and other support.

WHETHER MSME APPLICABLE ON MANUFACTURING CONCERNS ONLY OR ON TRADING AND SERVICE CLASS ALSO??

MSME shall be applicable on both Manufacturing concern as well as Service industries also including trading concerns.

Criteria for getting the MSMEM registration is as under

FOR MANUFACTURING CONCERN

Type of Enterprises                                           Investment in Plant and machinery

Micro enterprise                                                   Not to exceed Rs. 25 lakh

Small enterprise                                                   More than Rs. 25 lakh but does not to exceed Rs. 5 crore

Medium enterprise                                              More than Rs.5 crore but does not to exceed Rs.10 crore.

In case of the above enterprises, investment in plant and machinery is the original cost excluding land and building and the items specified by the Ministry of Small Scale Industries vide its notification No.S.O.1722(E) dated October 5, 2006 .

FOR SERVICE INDUSTRY

Enterprises engaged in providing or rendering of services and whose investment in equipment (original cost excluding land and building and furniture, fittings and other items not directly related to the service rendered or as may be notified under the MSMED Act, 2006 are specified below.

Type of Enterprises                                                           Investment in Plant and machinery

Micro enterprise                                                            Not exceed Rs. 10 lakh

Small enterprise                                              More than Rs.10 lakh but does not to exceed Rs. 2 crore Medium enterprise                                                                      More than Rs. 2 crore but does not to exceed Rs. 5 crore.

WHAT IS THE SUPPORT AVAILABLE FOR COLLATERAL FREE BORROWING?

The Ministry of MSME, Government of India and SIDBI set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) with a view to facilitate flow of credit to the MSE sector without the need for collaterals/ third party guarantees. The main objective of the scheme is that the lender should give importance to project viability and secure the credit facility purely on the primary security of the assets financed.

The Credit Guarantee scheme (CGS) seeks to reassure the lender that, in the event of an MSE unit, which availed collateral- free credit facilities, fails to discharge its liabilities to the lender, the Guarantee Trust would make good the loss incurred by the lender up to 85 per cent of the outstanding amount in default.

The CGTMSE would provide cover for credit facility up to Rs. 100 lakh which have been extended by lending institutions without any collateral security and /or third party guarantees. A guarantee and annual service fee is charged by the CGTMSE to avail of the guarantee cover. Presently the guarantee fee and annual service charges are to be borne by the borrower. For further details please visit www.dcmsme.gov.in.

DOCUMENTS REQUIREMENTS FOR REGISTRATION UNDER MSME

1. Person or an entity must have PAN Number and Adhaar Card Number.
2. If the entity is any Partnership Firm/ Company, then any of one Partner/ Director must have Adhaar No.
3. Entity must have Mobile No. and E-Mail Id
4. of persons employed in such Firm/ Entity
5. Declaration required from Proprietor/ Partner/ Director regarding Amount of investment in Plant and machinery on their letter head
6. Rent Deed/ Copy of Registry of property where the office is situated

BENEFITS FOR HAVING REGISTRATION UNDER MSME ACT

1. MSME Registration is an optional Registration under the MSMED Act that provides Micro, Small and Medium sized enterprises with a host of benefits and access to subsidies and schemes.
2. To sue means to institute legal proceedings against or to bring a suit in a court of law. Just as one person can bring a legal action in his/her own name against another in that person’s name, a company being an independent legal entity can sue and also be sued in its own name.
3. A person/ entity/ business house gets the registration under the Central Government and can proceed for opening of Bank Accounts in the name of his Proprietary Firm
4. A business house or any entity can stand in the market and before any Government Department as a Registered Entity.

CONCLUSION:

Although MSME registration is optional but an entity must get their business house registered subject to the criteria of their investment in plant and machinery to avail the benefits of the Government as well as to give his business a valid registration and to make its business a registered entity.

Regards:

CS Mohit Saluja,

Mohit Saluja & Associates

Company Secretaries

Jalandhar, csmohitsaluja@gmail.com

Ph. No. 99145-58709