MSME registration is an essential step for any business to legally commence its operations in India. The registration process is free, paperless, and based on self-declaration. It is categorized into two main types: manufacturing enterprises and service enterprises.
Recently, the Union Cabinet, led by Prime Minister Narendra Modi, officially revised the definitions of MSMEs, increasing the investment and turnover figures to larger values.
What is MSME Registration?
MSME registration is offered by the Indian government to Micro, Small, and Medium Enterprises (MSMEs) to help them avail benefits that facilitate the establishment and growth of their businesses. While it is not compulsory to obtain MSME registration, it is advantageous as it provides various benefits related to business setup, taxation, credit facilities, loans, and more. The entire registration process is conducted online through the Udyam registration portal.
Which Businesses Qualify for MSME Registration?
As per the Government of India, MSMEs include manufacturing and service industries, while trading companies are excluded from the scheme. The MSMED Act 2006 categorizes businesses into Manufacturing Enterprises and Service Enterprises based on their definitions, categorizations, and the registration policies relevant to the Central and State governments.
Manufacturing Enterprises are engaged in the production and manufacturing of goods, while Service Enterprises provide different services.
To be eligible for the MSME scheme, industries must meet the eligibility criteria set by the Ministry of Micro, Small, and Medium Enterprises. These criteria vary for Micro-Enterprises, Small-Enterprises, and Medium-Enterprises based on the investment in plant and machinery/equipment and turnover.
For Micro-Enterprises, the investment in machinery/equipment should not exceed Rs. 1 crore, and the turnover should be below Rs. 5 crores. For Small-Enterprises, the investment should not exceed Rs. 10 crores, and the turnover should not exceed Rs. 50 crores. Medium-Enterprises should have an investment below Rs. 50 crores and a turnover below Rs. 250 crores.
Documents Required for MSME Registration
- Aadhaar number
- PAN number
- Business address
- Bank account number
- Basic business activity
- NIC 2-digit code
- Investment details (plant/equipment details)
- Turnover details (as per the new MSME definition)
- Partnership deed
- Copies of sales and purchase bills
- Copies of licenses and bills of purchased machinery
What is Udyam Registration?
Udyam was launched by the Union MSME Ministry in 2020 as an online registration system for micro, small, and medium enterprises. Over 88 lakh MSMEs have successfully registered themselves through the Udyam registration portal. Udyam registration can be obtained free of cost through a fully digital and paperless process based on self-declaration. It is a prerequisite for availing benefits such as the Credit Guarantee Scheme, public procurement policy, additional advantages in government tenders, and protection against delayed payments, among others.
To register, you need to provide your Aadhaar, PAN, and GST numbers. The Udyam portal is integrated with the Income Tax and GST identification systems, as well as the government e-marketplace, making the registration process seamless. Your investment and turnover details will be automatically retrieved from government databases.
Difference Between MSME and Udyam Registration?
The Indian government introduced Udyam registration as a simpler alternative to Udyog Aadhaar for MSMEs to register on the government portal. The new process allows new businesses to register easily without lengthy procedures, saving them time. Previously, registration involved numerous categories and extensive paperwork. In contrast, the Udyam registration process is hassle-free, allowing anyone to register quickly through a single window without the need for extensive documentation.
The government launched two programs to support and promote MSME growth in India: Udyog Aadhaar and Udyam Registration (UR), also known as Udyam registration online. Both programs aim to achieve the same goal, but there are significant differences between them.
Udyog Aadhaar, also known as Udyog Aadhaar Memorandum (UAM), was launched by the Ministry of Micro, Small, and Medium Enterprises in September 2015. Its primary purpose was to provide MSMEs with a unique identification number that grants access to various government benefits, including subsidies and tax benefits.
The main difference between Udyog Aadhaar and Udyam is the process of obtaining the unique identification number. Udyog Aadhaar required businesses to provide a significant amount of information to the government, whereas Udyam Registration only requires self-declaration by the business.
Another distinction is that Udyam follows a one-page structure, meaning the registration process has only one step.
How to Apply for MSME Registration on Udyam Registration?
Businesses who want to avail benefits announced by the Government for MSMEs will need to register their business on the ‘Udyog Aadhaar Memorandum (UAM) portal’. The registration process is quite simple and free for every user.
Follow the below steps to register your business online:
1. Visit the Udyam registration Portal where you will be required to fill a form
2. If you are registering your business as an MSME for the first time, click on the first link on the page.
3. Enter the Aadhaar Number and Name and click on ‘Validate & Generate OTP’.
4. Once verification is done, you will have to fill in the PAN details. You can select the No option if you don’t have a PAN card yet.
5. Post this, you will have to fill the form having field numbers 5-24.
6. At the end of the form, an OTP request will be sent to your phone again. Enter the OTP and verification code to submit the form successfully.
7. After successful registration, a “Thank You” message will appear with a Registration Number. Keep that number handy for future reference.
8. Once the application form is submitted, it can take 2-3 days for the approval and registration to complete.
9. If the application gets approved, the registration will be done and the MSME certificate will be delivered to you via email.
Please note that the MSME registration on the government portal is free of cost.
How to Register an MSME without an Aadhaar Card?
If an individual does not possess an Aadhaar card according to Section 3 of the act, they can file UAM registration through the respective District Industries Centre (DIC) or MSME-DE for the enterprise or business.
In the meantime, the individual can provide alternative documents for identification, such as
the Aadhaar enrolment copy,
Aadhaar enrolment request copy,
Any of the following: Voter ID, passport, driving license, PAN card, employee ID, or bank passbook.
Benefits of MSME Registration?
Registering your MSME is not mandatory, but it offers several advantages. A registered business with an MSME certificate can enjoy benefits such as an excise exemption scheme from direct taxes, access to special schemes from banks tailored for MSMEs, and more. Additionally, registered businesses with an MSME certificate can benefit from various government departments, including electricity.
Here is a list of benefits:
- Lowest interest rates on bank loans
- Customized tax rebates for MSMEs, including credit for Minimum Alternate Tax (MAT)
- Easy access to credit for MSMEs
- Reimbursement of ISO Certification expenses
- Special rebates and concessions on patents and industry set-ups
- One-time settlement fee for unpaid amounts
- Government preference to MSMEs
- Concession in electricity bills
- Access to credit guarantee schemes from the Government
- Special consideration in international trade fairs
- Subsidy for bar code registration
- Support from state governments
Who Can Apply for MSME Registration?
Entities classified as Micro, Small, and Medium Enterprises (MSMEs) under the MSME classification are eligible to apply for MSME registration. However, individuals themselves cannot apply for MSME registration. Entities such as proprietorships, partnership firms, companies, trusts, or societies with an investment below Rs. 50 crore and an annual turnover below Rs. 250 crore can apply for MSME registration.
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