An MSME is an independently owned and operated business which has been established for profit and sells the products for the local customers. According to the updated definition, SMEs in India comprise both manufacturing and service enterprises and the classification is done based on the turnover and investment amount.
In October 2019, Union Minister Nitin Gadkari revised the definition of micro, small, and medium enterprises to grant a unified description for everything related to taxation, investment, etc. This was implemented to refine the operational scenarios for Indian enterprises. It led to change of the classification criterion for MSMEs to investment in plant and machinery.
On 13th May 2020, Finance Minister Nirmala Sitharaman added the additional criterion of turnover along with the investment. This definition was announced under the Atmanirbhar Bharat Abhiyaan to faciliate MSMEs to grow in size and help them deal with the difficulties levied upon by the pandemic.
As per this, there won’t be any distinction between manufacturing and services sector MSMEs, and will cover:
– Micro units with investment up to ₹1 crore and turnover up to ₹5 crore
– Small units with investment up to ₹10 crore and turnover up to ₹50 crore
– Medium units with investment up to ₹20 crore and turnover up to ₹100 crore
The definition, however, further got revised on June 1, 2020 on representations that the revision is still not in tune with the market and pricing conditions, and should be further revised upwards. As per the revised definition, it will be ₹50 crore of investment and ₹250 crore of turnover.
This step will help attract investments and create more jobs in the MSME sector. The following table provides the details of revised limits:
|Category||Old Capital||Old Turnover||New Capital||New Turnover|
|Micro||₹25 Lakh||₹10 Lakh||₹1 Crore||₹5 Crore|
|Small||₹5 Crore||₹2 Crore||₹10 Crore||₹50 Crore|
|Medium||₹10 Crore||₹5 Crore||₹50 Crore||₹250 Crore|
SMEs operate on a defined path, follow a structured business model with an intent to earn profits. The objective is to gain a financially viable position in the market without much risk.
Since small businesses follow a designated path that many in the same industry have followed, this reduces the amount of risk involved and ensures proven returns.
These setups rely on business finance to fund their company’s growth.
For an MSME to be called one and enjoy the benefits given by the government of India, it must be registered and have an MSME certificate. The benefits a registered MSME can avail are:
– They can bid for obtaining government tenders.
– MSMEs can get 15% import subsidy on loans for fully automatic machinery.
– It becomes easy for them to get licenses and approvals.
– They can avail reimbursement for the ISO certificate expenditure.
– They get low interest rates on loans.
– MSMEs can get the benefit of tariff and tax and capital subsidies, and an exemption under Direct Tax Laws.
How to register as an MSME?
MSMEs can register simply by visiting https://msme.gov.in/online-application and filling the application form. Once the registration process is complete, applicants can get MSME certificate within 5 working days. This certificate does not expire and is relevant for both manufacturing and service sector enterprises.
- To do the registration, visit https://msme.gov.in/online-application and fill the form.
- If a business owner wants to register for more than one industry, separate form must be filled.
- Details required for the registration are Personal Aadhar Number, Industry name, Address, bank account details.
- Once the details are filled and uploaded, you will receive a registration number.
Note: No registration fee is required for this process.
Benefits that start-ups get on registering as MSMEs
While Indian MSMEs are growing rapidly in Textile, Garments, IT, Retail, Pharmaceuticals, and service sectors with government assistance, start-ups are still facing difficulties in fundraising, resource hiring, etc. This makes it vital for start-ups to subsumed as MSMEs.
Start-ups that register as MSMEs can avail the following benefits:
- Benefits and incentives from the banking sector, such as Priority Sector lending where bank sanctions loan at subsidised rates basis the revenue model of business. Additionally, they get preferential treatment in events of delays in repayment.
- Benefits from the state government for the start-ups registered under the MSMED Act, such as special assistance in terms of tax/tariff subsidies, electricity exemptions, capital investments, state licenses. They also get easy approvals in fund applications from regulatory institutions.
- Benefits from the central government for the start-ups registered under the MSMED Act, such as tax exemptions, easy collateral-free loans, loans for their expansion and technology advancement.
Other benefit schemes include:
- Credit Guarantee Scheme (CGS): They are offered guarantee of credit assistance from SIDBI’s CGTMSE fund for businesses into manufacturing and service activities.
- Coir Udyami Yojana: This helps Coir Units with credit facility of up to 25% of the value of project to a maximum of ₹10 lakh.
- Market Development Assistance: Start-ups get access to international markets and can exports goods through government agencies with ease.
- Raw Material Assistance by NSIC: Easy finance facilitation to process raw material for production.
- Infrastructure Development Scheme: Facilitating access to software parks, lease spaces, and assistance in holding exhibitions in metro cities.
- Revamped Scheme of Fund for Regeneration of Traditional Industries (SFURTI): To help traditional industry and artisans, get organised and have long term sustainability, they are offered easy access to tools and equipment, improved technology, etc.
Start-ups registering as MSMEs to avail COVID relief
In order to avail the relief measures announced by the Finance Minister under the Aatmanirbhar Bharat Scheme, start-ups have to register as MSMEs on the Udyog Aadhaar portal. They can avail are:
- ₹3 lakh crores of collateral free loans
- ₹20,000 crore of subordinated debt for stressed MSMEs
- SIDBI’s Fund of funds for MSMEs with a corpus of ₹10,000 crore
Apart from this, the government has also announced several incentives such as reserving government procurement tenders up to ₹200 crore for domestic companies. This makes start-ups eligible to participate in the tenders.
Furthermore, MSME receivables from government and public sector enterprises are cleared within 45 days.
One-stop-shop for the MSMEs – CHAMPIONS
The Prime Minister, Narendra Modi, launched the technology platform CHAMPIONS (Creation and Harmonious Application of Modern Processes for Increasing the Output and National Strength) to make the smaller units big by solving their grievances. This one-stop solution from the MSME Ministry also aims to encourage, support, help and handhold MSMEs in the current scenario.
Objectives of CHAMPIONS:
- Grievance Redressal: To resolve the issues faced by the MSMEs including finance, raw materials, labour, regulatory permissions.
- Assistance in tapping new opportunities: To help MSMEs capture new opportunities in medical equipment and accessories manufacturing, such as PPEs, masks, etc, and facilitate them to supply in National and International markets
- Identification and Encouragement to MSMEs with potential: Those MSMEs who are able to withstand the current situation will be promoted to become national and international champions.
Start-ups registering as MSMEs can benefit from this platform.