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The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 in terms of which an eligible entity can register itself as MSME. The registration aims at supporting the MSMEs through various, government-funded subsidies, schemes, incentives which can help them in promoting their business and achieving growth. Whereas as per the latest press release issued by the Government of India dated 15th May 2020 and as per the proposal, there will be a change in the definition along with the additional financial support for MSMEs.
For the reader's ease, we have shared the information in the form of FAQs:
Question 1. Definition of MSME?
Answer: There has been a long-pending demand for revisions in the definition.
The low threshold in MSME definition has created a fear among MSMEs of graduating out of the benefits and hence killing the urge to grow. Now, Investment limit will be revised upwards and this will help the MSMEs to utilise the benefits provided by to MSMEs. In the revised definition, the defining criteria will be Investment and Annual Turnover. The distinction between manufacturing and service sector to be eliminated.
This revised definition will make many businesses eligible for MSME registration which can ultimately help them to restart their business with confidence with the support of Government. Whereas, Definition is yet to be notified.
Question 2. Registration process for MSME?
Answer: Below mentioned are the registration process for MSMEs:
Ø Step 1:
Any
existing functioning or new business set up fulfilling the eligibility criteria
can apply for MSME registration through a national portal for registration of
MSME.
Ø Step 2: An applicant shall submit all the required information in a single form for
registration. The form can be filed online or offline.
Ø Step 3:
If
an applicant wants to register more than one business even then they have to
obtain a single registration.
Ø Step 4:
There
are no registration fees required to be paid for MSME registration.
Ø Step 5: Once
an applicant submits the application successfully and the department will issue the
MSME registration certificate.
Please note: Aadhar number is
mandatory for this application.
Option without Aadhar Card:
An applicant or the authorised signatory who is not yet enrolled for Aadhaar shall have to apply for Aadhaar enrolment.
Provided that till the time Aadhaar is assigned to the individual, UAM registration shall be filed by the concerned DIC or MSME-DI on behalf of such enterprise, subject to the production of the following documents as alternative and viable means of identification.
(i) If he has enrolled, his Aadhaar Enrolment ID slip; or
(ii) A copy of his request made for Aadhaar enrolment,
(iii)Any of the documents, namely:- Bank photo passbook; or voter ID Card; or passport; or driving license; or PAN card; or employee photo identity card issued by the Government.
Please note that the following information will be required for MSME registration:
1. Aadhaar Number
2. Name of Owner- The applicant should fill his/her name strictly as mentioned on the Aadhaar Card issued by UIDAI.
3. Social Category- The Applicant may select Social Category. The proof of belonging to SC, ST or OBC may be asked by the appropriate authority, if and when required.
4. Gender- The Applicant can select the gender of an Entrepreneur.
5. Physically Handicapped- The Applicant can select Physically Handicapped status of Entrepreneur.
6. Name of Enterprise- The Applicant must fill the name by which his/her Enterprise is known to the customers/public and is a legal entity to conduct business. One applicant can have more than one enterprises doing business and each one can be registered for a separate Udyog Aadhaar and with the same Aadhaar Number as Enterprise 1 and Enterprise 2 etc.
7. Type of Organization- whether it is a sole proprietorship, partnership firm, Pvt ltd company or any other type of entity.
8. PAN Number - The Applicant have to enter PAN Number in case of Co-Operative, Private Limited, Public Limited and Limited Liability Partnership It. Will be optional in the remaining type of Organisation.
9. Location of Plant- The Applicant may add multiple plant location in one registration.
10. Official Address- The Applicant should fill in the appropriate postal address of the Enterprise including State, District, Pin code, Mobile No and Email.
11. Date of Commencement- The date in the past on which the business entity commenced its operations.
12. Previous Registration Details(if any)- If the Applicant's enterprise, for which the Udyog Aadhaar is being applied, is already issued a valid EM-I/II by the concerned GM (DIC) as per the MSMED Act 2006 or the SSI registration prevailing prior to the said Act, such number may be mentioned in the appropriate place.
13. Bank Details- The Applicant must provide his/her bank account number used for running the Enterprise in the appropriate place.
14. Major Activity- The major activity i.e. either "Manufacturing" or "Service" may be chosen by the enterprise for Udyog Aadhaar. If your enterprise involves in both type of activities and if major work involves in Manufacturing and small portion of activity involves in Service sector then select your major activity type as "Manufacturing" and if major work involves in Services and small portion of activity involves in Manufacturing then select your major activity type as "Services"
15. National Industry Classification Code (NIC Code)- The Applicant may choose multiple National Industrial Classification-2008 (NIC) Codes to includes all their activities. Which means user can select multiple NIC code of Manufacturing and Service sector.
16. The person employed- The total number of people who are directly been paid salary/ wages by the enterprise.
17. lnvestment and Annual Turnover
Question 3. Benefits of MSME Registration?
Answer:
A. Allowed as per the present law:
1. Collateral free bank loans: The Government of India has made collateral-free credit available to all small and micro-business sectors which guarantees funds to micro and small sector enterprises. Under this scheme, both the old as well as the new enterprises can claim the benefits. A trust named The Credit Guarantee Trust Fund Scheme was introduced by the Government Of India in association with SIDBI (Small Industries Development Bank Of India) and the Ministry of Micro, Small and Medium Enterprise to make sure this scheme is implemented (Credit Guarantee Scheme) for all Micro and Small Enterprise and MSME enterprises can avail the benefits provided under this scheme.
2. Subsidy on Patent Registration: 50% subsidy is given to the Enterprise that has the certificate of registration granted by MSME. This subsidy can be availed for patent registration by giving application to respective ministry.
3. Overdraft Interest Rate Exemption: Businesses or enterprises registered under MSME can avail a benefit of 1% on the Over Draft as mentioned in a scheme that differs from bank to bank.
4. Industrial Promotion Subsidy Eligibility: Enterprises registered under MSME are also eligible for a subsidy for Industrial Promotion as suggested by the Government.
5. Protection against Payments (Delayed Payments): At times, the buyers of services or products from the MSME’s or SSIs tend to delay the payment. The Ministry of Micro, Small and Medium Enterprise lend a helping hand to such enterprises by giving them the right to collect interest on the payments that are delayed from the buyer’s side. The settlement of such disputes must be done in minimum time through conciliation and arbitration.
In case, if any MSME registered enterprise supplies any goods or services to a buyer then the buyer is required to make the payment on or before the agreed date of payment or within 15 days from the day they had accepted the goods and services from MSME or SCI registered business (if there is no mention of the date of payment).
If the buyer delays the payment for more than 45 days after accepting the products or services then the buyer has to pay the compound interest along with interests (monthly) on the amount that was agreed to be paid. The interest rate is three times the rate that is notified by the Reserve Bank of India.
6. Concessional Electricity Bills: This concession is available to all the Enterprises that have the MSME Registration Certificate by providing an application to the department of the electricity along with the certificate of registration by MSME.
7. ISO Certification Charges Reimbursement: The registered MSME enterprises can claim the reimbursement of the expenses that were spent for the ISO certification.
8. Tax Rebates: There are various tax rebates offered to MSME.
9. MAT Credit: It also allowed credit for minimum alternate tax (MAT) to be carried forward for up to 15 years instead of 10 years.
10. Participation in Government Tenders: There are many government tenders which are only open to the MSME Industries.
B. Allowed as per the recently launched Aatmanirbhar Bharat Scheme: Finance Minister announced measures for relief and credit support related to businesses, especially MSMEs to support Indian Economy’s fight against COVID-19:
1. Rs 3 lakh crores Collateral free Automatic Loans for Businesses, including MSMEs:
a) The scheme can be availed till 31st Oct 2020.
b) Businesses have been badly hit due to COVID19 and they required financial support to meet operational liabilities so that they can restart their businesses can apply.
c) Government has decided to provide Emergency Credit Line to Businesses/MSMEs from Banks and NBFCs up to 20% of entire outstanding credit as on 29/02/2020.
d) Borrowers with up to Rs 25 crore outstanding and Rs 100 crore turnover will be eligible.
e) Loans to have 4-year tenor with a moratorium of 12 months on Principal repayment and Interest will be capped.
f) 100% credit guarantee cover to Banks and NBFCs on principal and interest;
g) No guarantee fee, no fresh collateral.
2. Rs 20,000 crore Subordinate Debt for Stressed MSMEs:
a) Government of India will facilitate the provision of Rs 20 000 crores as subordinate debt to stressed MSMEs.
b) Functioning MSMEs which are NPA or stressed will be eligible.
c) Promoters of the MSME will be given debt by banks, which will then be infused by the promoter as equity in the Unit.
3. Rs 50,000 crore equity infusion through MSME Fund of Funds (FoF):
a) Fund of Funds with Corpus of Rs 10,000 crores will be set up. It will provide equity funding for MSMEs with growth potential and viability.
b) FoF will be operated through a Mother Fund and few daughter funds. Fund structure will help leverage Rs 50,000 cr of funds at daughter funds level
c) This will help to expand MSME size as well as capacity. This will encourage MSMEs to get listed on the main board of Stock Exchanges.
4. No Global tenders for Government tenders of up to Rs 200 crore:
a) In order to expand a larger business area for MSME Global tenders will be disallowed in Government procurement tenders up to 200 crores.
b) Necessary amendments of General Financial Rules will be effected.
Conclusion: MSME stands for Micro, Small and Medium Enterprises. In a developing country like India, MSME industries are the backbone of the economy. This is a strong move by the Government of India for supporting the MSME industry and with the above-mentioned supports MSME can expand their business areas with the help of the Government.
Article By: Ms Bhavya Sharma, a Practising Company Secretary from Delhi.
In order to know more about the registration process, you can connect with us. You can contact us at Legal@bhavyasharmaandassociates.com or for more details you can visit: www.bhavyasharmaandassociates.com
Disclaimer: Although due care and diligence have been taken in the preparation and uploading this Article, Bhavya Sharma & Associate shall not be responsible for any loss or damage, resulting from any action taken on the basis of the contents of this Article. Anyone wishing to act on the basis of the material contained herein should do so after cross-checking with the circulars, notifications, applicable acts, press release issued by the concerned department or seek appropriate counsel for their situation.
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