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6 Benefits of registering under MSME?


Table of Contents

  1. What is Micro, Small & Medium Enterprises (MSME)?
  2. Classification of MSMEs under old and new definitions.
  3. Benefits of registering under MSME.
Over the last four decades, MSME or Micro, Small & Medium Enterprises have proved themselves to be the engine behind the Indian economy. MSMEs have been the backbone of the social as well as economic development of the nation. They are vital to the smooth functioning of the country as they not only help generate job opportunities but also work hand in hand towards the development of the country’s backward and rural areas.
benefits of registration under MSME

What is Micro, Small & Medium Enterprises (MSME)?

  • What does MSME stand for?
  • What type of business comes under MSME?
  • Role and Importance of MSMEs in the Indian Economy.

MSME or Micro, Small & Medium Enterprises is an initiative introduced by the government of India under the Micro, Small & Medium Enterprises Development Act (MSMED) in 2006. MSMEs are business entities engaged in the production, manufacturing, processing or preservation of goods and commodities. MSME is managed under the Ministry of MSME (MoMSME). As per the reports, Micro, Small and Medium Enterprises (MSMEs) contribute as much as 29% to the country’s GDP, a staggering 45% of the manufacturing output, and approximately 50% of the country’s exports. There are two types of business sectors that come under MSME. They are:

  1. Companies in the manufacturing sector that are involved in the production of goods for any industry mentioned in the first schedule of the Industries (Development and Regulation) Act, 1951, are included within the sphere of MSME.
  2. Companies in the service sector that engage in providing or rendering services are defined in terms of their investments in equipment.

MSME (Micro, Small & Medium Enterprises) have played a major role in the economic upliftment of Indian society. From small business entities to big industries, all of them have played their part in the nation’s socio-economic development in urban as well as rural areas. Small enterprises usually require low capital investment to start up new businesses. This creates vast job opportunities for unemployed people. Every year, new graduates look for jobs, and it is not possible for any country, including India, to provide sustainable jobs to all of them. Starting your own business with the help of this law can be a good source of income. Thus, MSME is a boon for freshers in India. It also helps in the inclusive growth of society.

On the one hand, when the poor keep getting poor and the rich keep getting rich, MSMEs help promote both small and medium-sized enterprises together by tying their needs to each other. This way, class disparity which is a deterrent to the development of society, diminishes significantly. In large-scale organizations, the cost of labour is significantly high, and it requires effective human resource management to keep it low. But in MSME, the cost of labour is minimum as the requirement of labour is less as it does not require highly skilled labour.

Classification of MSMEs under old and new definitions

Before the revision of the MSMED Act, the classification of MSMEs was as follows:

A. Manufacturing Sector

  • Micro Enterprises: Annual turnover is less than 5 crores.
  • Small Enterprises: Annual turnover is between 5 crores to 75 crores.
  • Medium Enterprises: Annual turnover is between 75 crores to 250 crores.

B. Service Sector

  • Micro Enterprises: Annual turnover is less than 5 crores.
  • Small Enterprises: Annual turnover is between 5 crores to 75 crores.
  • Medium Enterprises: Annual turnover is between 75 crores to 250 crores.

Under the new definition, the classification is as follows:

A. Manufacturing Sector

  • Micro Enterprises: Investment less than 1 crore and turnover less than 5 crores.
  • Small Enterprises: Investment less than 10 crores and turnover up to 50 crores.
  • Medium Enterprises: Investment less than 50 crores and turnover up to 250 crores.

B. Service Sector

  • Micro Enterprises: Investment less than 1 crore and turnover less than 5 crores.
  • Small Enterprises: Investment less than 10 crores and turnover up to 50 crores.
  • Medium Enterprises: Investment less than 50 crores and turnover up to 250 crores.

Benefits of registering under MSME

The MSME registration in India has not been made compulsory for enterprises, however, to reap the benefits that have been conceptualized by the government, one must get their enterprises registered. After registration, one becomes eligible to reap the benefits provided by the government, such as easy sanction of bank loans, low rate interests, exemption under Direct Tax Laws, tax subsidies, capital investment subsidies and other such benefits. Additionally, the operations of MSMEs would be allowed to continue transparently and objectively.

Here are some added benefits of getting your MSME registered under the provisions of these laws summarised in the section below:

  • Collateral-Free Bank Loans.: The Ministry of MSME, and Small Industries Development Bank of India (SIDBI), established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement collateral-free credit for Micro, Small and Medium Enterprises. Both the new and pre-existing enterprises are eligible to take loans under this scheme.
  • Subsidy on Patent Registration.: Under these laws, MSMEs that are registered under the Ministry of MSME can reap the benefits from a 50% subsidy on their patent registration fees. This motivates small businesses and firms to keep innovating and coming up with new ideas for projects and technologies.
  • Protection against delayed payments: MSMEs face a lot of challenges and problems that hinder the growth of their businesses, like late payments from buyers. To protect MSMEs from this, the Supreme Court has ordered buyers to complete the payment on or before the agreed-upon date of payment or within 15 days from the day since the deal was agreed. Failing to do so within 45 days will result in interest up to three times the initial amount.
  • Concession on Electricity Bills: MSMEs that are registered under this law are entitled to get a concession on their electricity bills. This keeps the load off the capital investment and maximises work potential without any worry of electricity cost. Enterprises can avail of this benefit by applying to the Ministry of MSME.
  • Direct Exemptions on Income Tax: Enterprises registered under this law get a direct exemption from income taxes for the first year of their business.
  • Subsidy for Barcode registration: Businesses registered under MSME can get barcode subsidies as per the government. Barcodes are codes made up of parallel lines that are readable through machines. Barcodes also help in keeping track of the sales and storage of goods and products.
Vyapar is a business accounting software that helps MSME owners to easily handle their invoices, accounts and provides other helpful features to make business procedures convenient and smooth. With Vyapar, you get an option to create multiple companies and up to five firms within a company. You also get an option to create GST as well as non-GST transactions. The goal of the Vyapar app is to make business procedures hassle-free and secure. Vyapar provides the option to backup your data to Google Drive, local-drive or email. It protects the data with a passcode, making transactions more secure. Vyapar provides easy methods for cash to bank or bank to cash transactions. If you are an MSME owner, the Vyapar app is your perfect business partner.