Benefits under MSME Registration that Startups should not miss on

MSME enterprises are the backbone of any economy and are an engine of economic growth, promoting equitable development for all. Therefore, to support and promote MSMEs, the Government of India through various subsidies, schemes and incentives promote MSMEs through the MSMED Act. To avail the benefits under the MSMED Act from Central or State Government and the Banking Sector, MSME Registration is required. This blog will help you entrepreneurs in understanding the Benefits under MSME Registration that Startups should not miss on.

Micro, Small and Medium sized enterprises in both the manufacturing and service sector can obtain MSME Registration under the MSMED Act. Though the MSME registration is not statutory, it is beneficial for business at it provides a range of benefits such as eligibility for lower rates of interest, excise exemption scheme, tax subsidies, power tariff subsidies, capital investment subsidies and other support.

MSME stands for micro, small and medium enterprises and any enterprise that falls under any of these three categories.

For Enterprises engaged in the manufacture or production, processing or preservation of goods, the definition is as follows:
  • Micro Enterprise: An enterprise where investment in plant and machinery does not exceed INR 25L
  • Small Enterprise: An enterprise where the investment in plant and machinery is more than INR 25L but does not exceed INR 5C.
  • Medium Enterprise: An enterprise where the investment in plant and machinery is more than INR 5C but does not exceed INR 10C.

In case of the above enterprises, investment in plant and machinery is the original cost excluding land and building and other items as specified by the Ministry of Small Scale Industries.

For Enterprises engaged in providing or rendering of services, the definition is as follows:
  • Micro Enterprise: An enterprise where the investment in equipment does not exceed INR 10L.
  • Small Enterprise: An enterprise where the investment in equipment is more than INR 10L but does not exceed INR 2C
  • Medium Enterprise: An enterprise where the investment in equipment is more than INR 2C but does not exceed INR 5C
Entities that can benefit under MSMED Act through MSME Registration are:
  • Proprietorship firms,
  • partnership firms,
  • LLPs,
  • Private Limited Company’s, and
  • Public Limited Companies

In India, the MSMEs contribution is highly remarkable in the overall industrial economy of the country. In recent years the MSME sector has consistently registered higher growth rate compared to the overall industrial sector. With its agility and dynamism, the sector has shown admirable innovativeness and adaptability to survive the recent economic downturn and recession. In Indian market, MSMEs rapid growth could be seen as Indian entrepreneurs are making remarkable progress in various Industries like Manufacturing, Precision Engineering Design, Food Processing, Pharmaceutical, Textile & Garments, Retail, IT and ITES, Agro and Service sector. The sector not only serves for urban market but also helps in industrialization of rural and backward areas, reducing regional Imbalances and assuring more equitable distribution of national income and wealth. MSMEs complement large industries as ancillary units and contribute enormously to the socioeconomic development of the country.

Basket of Benefits under MSME Registration:
Some of the benefits from Central Government include:
  • Easy sanction of bank loans (Priority sector lending),
  • Lower rates of interest,
  • Excise exemption scheme
  • Exemption under Direct Tax Laws, and
  • Statutory support such as reservation and the interest on Delayed Payments Act.
State Government and Union Territories also have complied their own package of facilities and incentives for MSMEs. Some of the benefits provided by State Government for MSMEs:
  • Development of specialized industrial estates,
  • Tax subsidies,
  • Power tariff subsidies,
  • Capital investment subsidies, and
  • other support.

Both the Centre and the State, whether under law or otherwise, target their incentives and support packages generally to businesses registered with them under MSMED Act.

Banking Laws, Excise Law and the Direct Taxes Law have incorporated the word MSME in their exemption notifications. Therefore, the registration certificate issued by the registering authority is seen as proof of being MSME and is required to avail the benefits sanctioned for MSMEs.

Other benefits of MSME / SSI registration for small businesses:
  • Cheaper bank loans: The rate of interest on loan offered to MSMEs is 1-1.5% lower compared to typical business loan interest.
  • Easy access to credit: PM Modi has introduced the Mudhra Loan scheme, which provides loans to MSME / SSI without collaterals.
  • Quicker approvals from state and central government bodies: Business registered under MSME are given higher preference in terms of government license and certification.
  • Tax rebates: MSME / SSI registered businesses enjoy multiple income taxes and capital gains tax subsidies from the government.
  • Cheaper infrastructure: Charges are lower for MSME registered company for facilities such as electricity and VAT exemptions. In fact, other business services such as patents are also cheaper for MSMEs.
  • Access to tenders: There are multiple government tenders which are open only to MSMEs to promote small business participation in the India.
Procedure for MSME Registration:

All Micro & Small Enterprises which are registered with the Director of Industries (DI)/District Industries Centre (DIC) as manufacturing/service enterprises or having Acknowledgement of Entrepreneurs Memorandum (EM Part-II) are eligible for registration with NSIC under its Single Point Registration Scheme (SPRS).

Micro & Small Enterprises who have already commenced their commercial production but not completed one year of existence. The Provisional Registration Certificate can be issued to such Micro & Small Enterprises under Single Point Registration scheme with monitory limit, minimum amount of money to be invested, of Rs. 5 Lacs which shall be valid for the period of one year only from the date of issue after levying the registration fee and obtaining the requisite documents.

How to apply:

Micro and Small enterprises can apply through online application that is provided by the prescribed state website respective state in which or by submitting the application form in duplicate which is to be submitted the concerned Zonal/Branch Office of NSIC located nearest to the unit.

Step by Step Procedure:

Step 1: Provisional Small Scale Industry (SSI) Registration

To obtain SSI registration you must apply for provisional SSI registration certificate. This certificate is given when the unit is in pre-operative stage and helps SSI unit obtain term loans and working capital. This license is given for five years.

One could apply for this certificate online through the state website or by applying in the concerned zonal department.

Important Documents for Provisional SSI registration:

  • Three passport size photographs of proprietors/partners/directors, as the case may be.
  • Photocopy of the partnership deed in case of a partnership unit. It is not necessary that the partnership should be registered under the partnership Act.
  • Copy of the Memorandum and Articles of Association in case of Private Company along with certificate of incorporation. Copy of the resolution of the company authorising one of the Directors of the company to sign the application form and also appear for the interview.
  • Proof of legal possession i.e. rent receipt, NOC from the landlord with proof of ownership, the power load authorised by the connection holder to the applicant
  • Provisional Registration would be allowed in approved Industrial areas only after the Unit has obtained consent to establish from Pollution Control Committee
  • Some of the documents may differ because each state has different requirements of documents. Above given documents are minimum required documents which are to be submitted

Benefits of Provisional SSI registration

  • Material for construction of factory building : The material which is needed for construction of the factory or building would be available to the factory at subsidized rates from government
  • Apply for Municipal Corporation License & power connection. With the provisional registration the company would be able to get all the clearances from the concerned authorities.

Step 2: Start the Business

The next step towards having a permanent license is to start the business with SSI certificate. The owner should start the production in the factory so that permanent license could be given.

Step 3: Apply for Permanent SSI registration

After you have started the business you should apply for permanent SSI registration. This could be done by applying online through state website or through the Zonal office or district office of the department.

Requirements for applying PRC (Permanent Registration Certificate):

  • You may apply for the PRC without an industrial license in case your unit is listed in Schedule-III of the Industrial Licensing Exemption Notification. Other units must first acquire an industrial license.
  • The unit should have obtained all clearances from the pollution control board, drug control board etc.
  • The unit should not violate any locational restriction
  • The original value of plant including machinery should be within prescribed limits for which you are applying.
  • The unit should not be a subsidiary, owned or controlled by another industrial undertaking.

Documents which are to be submitted for applying in:

  • Proof of ownership of premises i.e. allotment letter/possession letter/lease Deed/property tax receipt. If the unit has a municipal corporation license in its own name or in the name of its proprietor or one of the Partner/Directors as the case may be, then no other proof of legal possession is required.
  • In case premises are arranged on rental basis, unit should submit proof of Legal possession i.e. a rent receipt and/or NOC from the landlord supported by the proof of land lord’s ownership. For this purpose rent receipt/rent agreement with GPA (General Power of Attorney) is also accepted provided the GPA is appointed by the owner/lessee through a Regd. deed.
  • One photo copy of sale bill of each end product applied for.
  • One photo copy of purchase bill of each raw material.
  • Copy of partnership deed in case of partnership unit (this need not be registered.)
  • Copy of Memorandum of Articles of Association with certificate of incorporation in case of private limited company, along with copy of resolution authorising one of the directors to sign the application for grant of permanent SSI registration.
  • Copy of the industrial license from Govt. of India in case the end products require such license under Industrial Development and Regulation Act.1951.
  • An affidavit on Rs.10/- Non judicial Stamp Paper duly attested by Notary Public affixed with proper notarial Stamp giving the status of the unit, machinery installed, power requirement etc. as per the prescribed format
  • Purchase bill of machinery installed.
  • Photo copy of valid consent letter from pollution control committee of that state.

The government of India has been doing its best to support the MSME ecosystem, it is high time that startups realise the basket of benefits that MSME registration brings to the business. We at Wazzeer have been constantly watching and updating entrepreneurs with best options brought by policy makers. One such highly appreciated initiative is MSME Registration. You can get your business MSME registered at Wazzeer, we promise you a glitch free project delivery powered by technology.

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Sankar Majumder
Sankar Majumder
2 years ago

Need to be supported by central govt.schme for financial assistance

Ishika Agarwal
Ishika Agarwal
2 years ago