MSME (Micro, Small, and Medium Enterprises), as the name suggests, includes enterprises that are at a medium or below the medium level with respect to the terms of production and investment. MSME, in India, follows The MSMED Act, 2006 that is The Micro Small and Medium Enterprises Development Act, 2006. Classification of an enterprise is done in terms of investment. MSME forms a vital part of any country’s growth. They contribute majorly to the country’s economy. Hence, to encourage MSMEs, many programs and relaxations are developed for them. In order to avail these benefits, MSME needs to go through MSME registration.
One fact that has been established already is that MSME registration provides certain benefits. Many entrepreneurs usually try and ignore this registration, simply because there are already so many compliances.
Classification of the enterprises
- Micro Enterprises are the one where investment is not more than Rupees 25lakhs.
- Small Enterprises are the one with an investment of more than Rupees 25 lakhs and less than Rupees 50 crores.
- Medium Enterprises are the one with an investment of more than Rupees 5 crores but less than Rupees 10 crores.
The above investment is noted in terms of investment made in plant and machinery. In the case of an enterprise which provides services rather than being a manufacturing and production unit, the classification is done as follows.
- A Micro Enterprise is the one with an investment of Rupees below 10 lakhs.
- A Small Enterprise is the one with an investment of more than Rupees 10 lakhs and less than Rupees 2 crores.
- And, a Medium Enterprise is the one with an investment of more than Rupees 2 crores and less than Rupees 5 crores.
Benefits of MSME certificate
- If a memorandum is filed by the MSME, then it is liable to timely payments by the buyer.
- Certain exemptions under Excise Scheme and Direct Tax Laws are provided.
- Finance from banks is easy to obtain due to the Government support. The lower rate of interests is also observed.
- Preference is given in Government tenders and a concession in electricity bills is also given.
- Statutory support is provided. It includes reservation and interests on The Delayed Payments Act
- There are about twenty items reserved exclusively for MSE sector (Micro and Small Enterprises sector). They can manufacture any item including these twenty items as per their convenience.
- There is a separate council, MSEFC(Micro and Small Enterprises Facilitation Council). The application can be made to the council at the time of any dispute by the MSE sector.
- They are liable to credit facilities like Cash Credit, Term Loan, Letter of Credit, Bank Guarantees, and Composite loan.
To avail all these benefits, MSME registration is a must. There is no compulsion. But no MSME registration leads to no benefits. It may add to the already compulsory compliances, but, on the brighter side, it comes with many benefits. These benefits were introduced so as to promote MSME sector. MSME sector obviously is given preference and exemptions are provided. It is not only done to lure entrepreneurs but in the hope of employment generation, economic growth and overall development of the nation. The registration should not be seen as a waste of time and money but as an opportunity to enjoy benefits that apparently large companies cannot. In order to go through MSME registration, you can visit us at LegalRaasta. We will be more than happy to assist you.