MSME Registration Benefits in India
Jun 02, 2022
MSMEs (Micro, Small, and Medium Enterprises) are the small businesses that drive our economy forward. MSMEs are the backbone of the economy in developing countries like India, and they contribute to the country’s socio-economic development. After agriculture, the Micro, Small, and Medium Enterprise (MSME) sector employs the second-largest number of people in India. It accounts for 30% of the nation’s GDP. As a result, the MSME sector is crucial to our economic development. Small and medium-sized businesses have long been encouraged by the government. Furthermore, the government makes every effort to give MSMEs benefits. This is why it is critical and beneficial to register an MSME.
The section below summarises some of the significant MSME registration benefits under the requirements of the concerned laws.
1. Collateral Free Bank Loans
According to the Indian government’s initiatives, all small and microbusinesses now have access to collateral-free lending. This programme helps micro and small enterprises apply for business loans and get capital. This programme provides benefits to both existing and new enterprises. The Small Industries Development Bank of India (SIDBI) established the Credit Guarantee Fund Trust for Micro and Small Enterprises, which awards collateral-free loans.
2. Reduction in Rate of Interest from Banks
When compared to other businesses, an MSME registered business enjoys a reduced rate of interest. Priority credit has been maintained for the MSME sector. Bank lending to MSMEs has been established at a certain level, giving an advantage to MSMEs with a low business loan interest rate. Credit to micro and small businesses must increase by 20% in the next two years. The number of micro-enterprises is increasing at a rate of 10% per year. A minimum of 60% of the bank’s total lending must be allocated to the MSME sector.
3. Protection Against Deferred Payments
When a customer buys items or services from a registered MSME, the customer is required to pay on or before the set or decided payment date, or within 15 days of receiving the ordered item from the vendor. The buyer will be compelled to pay interest on the agreed-upon price if payment is delayed for more than 45 days after accepting the products or services. The interest rate is three times the official rate of the Reserve Bank of India. This is one of the most useful advantages of MSME registration.
4. Subsidy on Patent Registration
The enterprise that has the certificate of registration granted by MSME has been given a hefty 50% subsidy or a maximum of 15 lakh INR per invention, whichever is less. This subsidy is available for patent registration by submitting an application to the appropriate ministry.
5. Advantage in the International Trade Fairs
Financial aid to state/central government agencies, businesses, registered associations, and organisations affiliated with MSME for the commissioning of MSME business delegations to other countries under the International Cooperation Scheme.
Its mission is to explore new innovative products that can be developed by MSMEs, as well as to encourage Indian MSMEs to participate in international expositions to gain exposure and learn about new technological advancements, trade fairs, and buyer-seller interactions, as well as to hold international workshops and events that are beneficial to the MSME sector.
6. Reimbursement of ISO certification
If MSME registered enterprises submit an application together with their registration certificate to the concerned authority, they will be excluded from all ISO certificate fees. ISO certification is necessary to promote the standards of MSMEs at the time of bidding in order to amplify their efficiency.
7. No Income Tax for Startups
For three years out of seven, no income tax is payable—that is, startups are entitled to a 100% tax exemption on profits for the initial three out of seven years, as long as their annual revenue in a fiscal year does not exceed Rs 25 crores. The Income Tax Act permits it. Businesses that have been in operation for up to ten years are still considered startups for this benefit. In addition, instead of being limited to 10 years, the minimum alternate tax (MAT) credit can now be carried forward for up to 15 years. This MSME registration benefits a startup financially during the initial years.
8. Concession in Electricity Bills
All companies or enterprises with an MSME Registration Certificate are eligible for concessions on their electricity bills. This allows companies to increase output and take on more orders without having to worry about capital costs such as energy and servicing. The concession is available to micro, small, and medium businesses who submit an application to the Department of Electricity along with their MSME registration certificate.
9. Priority while Applying for Licenses and Approvals
Those businesses who present a Certificate of MSME Registration when applying for licences, permits, or registrations from the appropriate authorities in any field for their business are given priority and the procedure is streamlined for them.
10. CLSS 15% Subsidy
The Department of Micro, Small, and Medium Enterprises (MSME) has a scheme for upgrading the technology of enterprises called the Credit Linked CGSTI Subsidy Scheme (CLCSS). This MSME registration benefit was introduced by the Indian government in the year 2000, and it provides a 15% subsidy that cannot exceed Rs. 15 lakhs. The scheme’s maximum loan limit for calculating subsidies is Rs. 100 lakh.
List of Documents for MSME Registration
To register for MSME in India, please see the documentation listed below.
- Aadhaar card
- Card of Pan
- A lease agreement
- Documents related to property
- A cheque that has been cancelled
- (Sale/Purchase Invoice) Company Registration
- Proof of Registered Business Address
- Memorandum of Association (MoA)
- Articles of Association (AoA)
- Copies of Purchase and Sale Bills
- Declaration of Partnership
- Copies of purchased licences and bills of sale
MSME Registration Process
MSME applicants must follow the MSME registration process and complete the one-page ‘MSME/Udyam Registration form.
Applicants must fill in the following information on the application form:
- The number of Aadhar cards issued to individuals
- The Industry’s Name
- The organization’s official address
- Bank account information
After submitting the MSME registration application, applicants will obtain an Udyam Registration Number.
Schemes, budget plans, credit-free loans, and other factors are just a few of the benefits of MSME registration. It serves not only as a motivator but also as a benchmark for the industrial turnover on a global and international scale. The centre and state, and union territory administrations, have created distinct programmes that provide a variety of benefits under various systems. These enterprises are being encouraged to expand and contribute more to the economy. All types of businesses can take advantage of the MSME registration benefits introduced by the government.