A nation’s economic growth largely depends upon the development of its manufacturing and service sectors. Now, in developing countries, these sectors include many small enterprises that are in the growing phase. Due to their significance in the development of an economy, the Government makes sure these industries receive all kinds of benefits and provides them with a favorable environment to grow.
In India, these small-scale industries (SSIs) are termed as MSMEs (Micro, Small and Medium Enterprises). Starting from MSME registration to providing several incentives for better performance, the Central and State Governments leave no stone unturned to help the SSIs flourish.
- 1 What are MSMEs and their role in Indian Economy?
- 2 What is Udyog Aadhar?
- 3 MSME Registration Benefits
- 3.1 Financial support from banks facilitated by Government
- 3.2 Schemes by the Central Government for development of SSIs
- 3.3 Tax Benefits
- 3.4 Reservation of Products to be produced by MSMEs only
- 3.5 No More Delayed Payment Troubles
- 3.6 Reduced Fees for Trademark Registration
- 3.7 Foreign Business Expo
- 3.8 An exemption in interest on Overdraft
- 3.9 Facilities for Upgradation of Technology used in the industry
- 3.10 Subsidies and Government Schemes to promote your industry
- 3.11 Remuneration for ISO certification expenses
- 3.12 Reduction in Electricity Bills
- 4 Need Help? Please fill below form to Get in touch
What are MSMEs and their role in Indian Economy?
MSMEs stand for the Micro, Small and Medium Enterprises, which are an integral part of the manufacturing and service sectors in India. These SSIs provide employment to more than 120 million people and contribute to the GDP more than the agricultural sector.
If we speak of the manufacturing sector, the GDP contribution is around 6.11% whereas, it’s 24.63% of the service sector. With an export share of 45% and a growth rate of 10%, the MSMEs are rightly known as the “Engine of Economic Growth” in India.
The SSIs have been strong even in the times of economic crises and are the reason behind the empowerment of the economically weaker sections of the society.
Since the MSMEs are significant, the Government has a myriad of benefits in store for them once they’re registered under the MSMED Act. They’re often termed as the MSME Registration Benefits. It isn’t mandatory to register the small-scale industries, but in order to get the most out of these benefits, this legal action is essential.
But before we move onto the benefits of registration of MSMEs, let’s take a look at how are these classified.
Classification of Small-Scale Industries or MSMEs
The SSIs are classified according to two categories:
- Manufacturing sector
- Service sector
The manufacturing sector uses raw materials to produce finished products. Here, the industries are defined in the following way:
- Micro Enterprise – Are the ones with an investment less than or equal to ₹25 lakhs in plant and machinery.
- Small Enterprise – Are the entities with an investment in plant and machinery of more than 25 lakhs but less than or equal to ₹5 crores.
- Medium Enterprise – The industries with more than ₹5 crores but less than or equal to ₹10 crores investment in plant and machinery.
The service sector produces intangible products. The SSIs in this sector are:
- Micro Enterprise – The industries which have an investment in equipment that doesn’t exceed ₹10 lakhs.
- Small Enterprise – Are the ones with an investment in equipment of more than ₹10 lakhs but less than or equal to ₹2 crores.
- Medium Enterprise – The industries with an investment of more than ₹2 crores not exceeding ₹5 crores in equipment.
The micro, small and medium enterprises need to be registered under the MSMED Act to avail the MSME benefits. The Government has provided Udyog Aadhar facility to ease the MSME Registration process.
What is Udyog Aadhar?
Udyog Aadhar is a system provided by the Government to let people register their business enterprises under the MSMED Act. In return, the entities are provided with an MSME Registration certificate and a unique number which helps them in availing the MSME Registration Benefits.
The MSME Udyog Aadhar facility is here to simplify the process of certification. Earlier, MSME registration was a complex and time-taking process that involved a lot of paperwork. Now, with Udyog Aadhar system, things have become easier. One just needs to do the SSI online registration and enjoy the MSME registration benefits like a BOSS!
[Udyog Aadhar will definitely help you to take your business forward in all aspects. To gain in-depth knowledge about Udyog Aadhar, read our article on What is Udyog Aadhar and why should you register?]
MSME Registration Benefits
The Central and State Governments make sure the SSIs grow and develop gradually, and their interests are always taken care of. The benefits can be enjoyed by the businesses that have an MSME registration certificate. Let’s take a look at the benefits a small business can enjoy:
Financial support from banks facilitated by Government
It is easy to raise funds for the financial needs of the Micro, Small and Medium Enterprises once they’re registered under the MSMED Act. The Government helps in providing subsidized loans from banks with low-interest rates. It is one of the most significant MSME registration benefits in India.
Schemes by the Central Government for development of SSIs
With schemes like Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), collateral-free loans are provided to the MSMEs. Further, Small Industries Development Bank of India (SIDBI) provides financial aid to the MSMEs through Pradhan Mantri MUDRA (Micro Units Development and Refinance Agency) Yojana.
[Are you a new Start-up owner looking for a loan? Here is the blog on: How to get Pradhan Mantri Mudra Yojana (PMMY) Loan]
Taking into consideration the kind of business you do, you can avail excise duty exemption. Moreover, you can also enjoy direct tax exemption benefits in the initial growth phase of your business.
Reservation of Products to be produced by MSMEs only
Since the SSIs operate on a smaller scale, the Government makes sure that they do not die down due to the prevailing competition in the market. For this reason, it has reserved certain products that must be produced by the Micro, Small and Medium Enterprises only. Moreover, the Government stores are bound to purchase certain products like wooden furniture, jewelry, pickles, etc from these industries.
No More Delayed Payment Troubles
The Government helps the MSMEs against buyers that do not pay on time. During the supply of goods and services, if there is a date that has been mentioned in the agreement between the MSMEs and the buyers, the payment is supposed to make on or before it. If no due date has been mentioned, the buyer has to initiate the payment within 15 days after the goods and services have been accepted. No payment, however, shall exceed forty-five days after the goods and services have been supplied. In case the buyers do not comply with these provisions, they have to pay the penalty due to the delay in payments. The MSME registration makes sure the needs of small entrepreneurs like you aren’t compromised.
Reduced Fees for Trademark Registration
The MSME registration certificate can help you in trademark registration as well. It gives you the opportunity of having a 50% subsidy in the payment of fees while you’re registering for trademark or a patent.
Foreign Business Expo
The Government, helps the Micro, Small and Medium Enterprises in participating in foreign expo’s by providing financial assistance. This way, your export and import interests are well taken care of. MSME benefits like these motivate people to become entrepreneurs and run businesses successfully.
An exemption in interest on Overdraft
If your SSI is registered under the MSMED Act, you can enjoy a 1% exemption on the interest rate on overdraft facilities. The OD facility, however, differs from one financial institution to the other.
Facilities for Upgradation of Technology used in the industry
The SSIs run low on financial capital as compared to the other industries. This may be a reason behind their use of obsolete machinery for the production of goods and services. Hence, the Government makes sure the small-scale industries are provided funds under the Capital Aid for Technological Upgradation Scheme to upgrade the equipment they use. The MSME benefits are all-round. Isn’t it?
Subsidies and Government Schemes to promote your industry
The State Governments have launched a number of schemes that help in promoting the business of SSIs. Some schemes like Pradhan Mantri Employment Generation Programme and Skill Development Programme go a long way in developing your enterprises. Also, the Government provides subsidies to help raise your revenues.
Remuneration for ISO certification expenses
The industries that own an MSME registration certificate is liable to receive compensation if and when they incur any expenses on ISO certification.
Reduction in Electricity Bills
If your business enterprise is registered under the MSMED Act, you can enjoy a huge concession on your electricity bills. This way, you can reduce the amount of fixed cost you incur in managing your business. The MSME registration benefits give way to proper development and growth of your industry.
So, you can see how one MSME registration certificate can help in establishing your business. With the simplified Udyog Aadhar process, you will be able to open the gateway to a multitude of advantages and become a successful entrepreneur. Thereby, you will be able to make a valuable contribution to the growth of your economy.
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Afleo offers MSME Registration facilities rendering assistance for industries and businesses in getting themselves registered soon and avail the benefits faster. For any query, please feel free and get in touch with us.