What is MSME - Benefits and Its Registration Process

What is MSME?

MSME Act 2006 forms the basis of the MSME definition. Considering the significant changes the manufacturing and service units have undergone over the past few years, the Indian government has introduced a new formula to classify a business as MSME. According to the new definition, the service and manufacturing sectors are no different. While the previous criterion required frequent inspections to check investments needed for plant and machinery, they can now continue operations more objectively, transparently, and non-discriminately.

The new MSME classification depends on the enterprise’s investment and turnover amounts. A business with an investment limit of Rs 1 Crore and a turnover limit of Rs 5 Crore is classified as a micro-enterprise. Companies with an investment of up to Rs 10 Crore and turnover of up to Rs 50 Crore are small enterprises. In comparison, a company with an investment of up to Rs 50 Crore and turnover not exceeding Rs 250 Crore is a medium-sized business. However, an MSME must register itself to receive an MSME certificate to qualify for the offered benefits. Want to know what an MSME certificate is? It is a legal document that recognises a business as a registered MSME.

Also Read: Top 6 Ways To Boost Your MSME Loan Eligibility

Benefits of MSMEs

Now that you know what is MSME, let’s look at the benefits of MSMEs:

Contribution to GDP Growth

A large percentage of Indian businesses come under the umbrella of MSMEs, and they largely contribute to the country’s economy. Apart from increasing the nation’s internal production, they contribute to exports, giving India a better position in the global economy.

Employment Generation

MSMEs are the major employment generators in India. The country has over 60 million units, generating around 110 million jobs for the available workforce. Therefore, the MSME sector helps Indian citizens lead a better life by reducing unemployment.

Increased Exports

MSMEs are the major contributors to Indian exports. The MSME Act 2006 does not include the export value while calculating the company's annual turnover to encourage exports among MSMEs. It promotes small and medium-sized businesses to produce more commodities for export purposes.

Access to Loans and Credit Facilities

Loan providers encourage Indian MSMEs by providing easy MSME loan approvals with simple eligibility conditions. Top lending institutions like Hero FinCorp offer unsecured SME Loans of up to Rs 40 lakh at competitive interest rates and flexible repayment terms of up to 60 months.

Subsidies and Grants

Registered businesses become eligible to benefit from the various subsidies and grants the Indian government provides to MSMEs. These include PMMY, PMEGP, CGT MSE, CLCSS, and substantial tax benefits.

Ease of Doing Business

With easy Business Loans, lenient regulations, and support from the Indian government, MSME owners find it easier to do business in the country.

Also Read: What is MSME Databank? Know the Registration & Verification

Contribution of MSMEs to Country’s Economy

The contribution of MSMEs towards India’s GDP is on the rise year after year. Below is a year-wise share of MSMEs in the Indian GDP:

How to Register as an MSME?

A micro, small, or medium-sized business must register as an MSME to avail of the benefits. Here’s how to register as an MSME on the UAM (Udyog Aadhaar Memorandum) portal online:

• Visit the UAM web portal for MSME registration
• Click on the first link that says “For new entrepreneurs who are not registered yet as MSME or those with EM-II”
• Submit name and Aadhaar Number
• Tick the consent button
• Click the ‘Validate & Generate OTP’ button
• Submit PAN card and organisation-related details (Those with no PAN can select the ‘No’ option)
• Enter other crucial information in the remaining fields
• Provide the OTP received on the registered mobile number
• Enter a verification code for form submission
• See the “Thank You” message along with a registration number

Now that you know what MSME registration is and how to go about it, you should know that approval takes around 2-3 days. Once the registration is approved, the MSME owner receives a registration certificate through email.

Conclusion

MSMEs have made a significant contribution to the country's progress. They propel the nation towards a global economy through the MSME revolution in India. However, MSMEs need financial support to achieve their goals and expand their horizons. That is why it’s crucial to understand what is MSME loan and know how to obtain one. An MSME loan calculator helps calculate EMIs that support an MSME without stretching its finances. Once an entrepreneur gets clarity on the loan amount, they can apply for an unsecured Business Loan online from Hero FinCorp.

Frequently Asked Questions

1. What is the difference between a start-up and an MSME?

A start-up is a business the owners have just established or are planning to set up. An MSME is a micro, small, or medium-sized business that might have been operational for a long time.

2. How do you know if a company is MSME?

An MSME can be easily recognised with its investment amount and annual turnover.

3. Who are called MSMEs in India?

Micro, small, and medium-sized businesses operational in India for a few years are called MSMEs.

4. What is the difference between a small company and MSME?

A small company might be an unregistered business working in a local area, while an MSME is a registered enterprise eligible to avail various benefits.

5. What are the three types of enterprises under MSME?

The three types of enterprises under MSME are micro, small, and medium-sized businesses in the manufacturing or services sector.