The MSME sector is considered a driving force for a developing economy like India. Its contribution towards employment generation and development of backward areas is unmatched. According to msme.gov.in, the MSMEs are the sole contributors to 45% of the country’s industrial employment and they produce more than 6500 products within the country. These domestic manufacturing organisations contribute to 45% of the overall exports from India.
Compared to large-scale industries, the MSME sector requires less investment and unskilled or semi-skilled employees. This reduces their overall cost and increases their success rate.
Though MSME registrations are not yet mandatory, it is beneficial for small-scale businesses. MSME registration is possible with or without a PAN card. These businesses can get tax benefits, credit facilities, loans, and help required for setting up new businesses.
What are MSME or Micro, Small and Medium Establishments?
According to the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, businesses are divided into two categories, based on the amount of investment made.
- Manufacturing enterprises:
These organisations are involved in the production, manufacturing and distribution of various products and commodities.
These establishments are involved in providing services:
Less than Rs.25 lakh
Less than Rs.5 Crore
Less than Rs.10 Crore
Less than Rs.10 lakh
Less than Rs.2 Crore
Less than Rs.5 Crore
Number of Employees
1 to 10
10 to 50
These existing conditions of categorising MSMEs were blocking industries from growing. Companies kept their investments low to keep getting the MSME benefits. They had to fit within the set categories, which stopped them from any potential expansion or growth.
Under the Atmanirbhar Bharath Abhiyan, these preconditions have been revised. Now, a combination of both Investment and Annual Turnover of these businesses is considered to put them in different categories, helping them to grow.
- Micro establishment- They must have an investment of less than Rs.1 Crore and an annual turnover of not more than Rs.5 Crore.
- Small establishment- They must have an investment of less than Rs.10 Crore and an annual turnover of not more than Rs.50 Crore.
- Medium establishment- They must have an investment of less than Rs.50 Crore and an annual turnover of not more than Rs.250 Crore.
Eligibility for MSME Registration
Who can apply for MSME?
Any micro, small, and medium organisations who come under the below-mentioned business types, can register and get the MSME benefits
- Private limited company
- Public limited company
- Self-help groups
- Co-operative society
- Business trusts
These businesses should be within the given investment and annual turnover conditions for micro, small, and medium enterprises.
The MSME registration requirements include various documents that need to be either uploaded or presented at the time of MSME registration. These documents are:
- Personal Aadhar Card
- Name of the establishment
- Address of the establishment
- Complete Bank details
- Rent Agreement
- Property papers
Apart from these documents, few other document proofs are required for MSME registration.
- Purchase or sale bill - The bills of purchased raw materials that the business uses for manufacturing the goods, need to be submitted as proof. Alternatively, bills generated during the sale of the product can also be used as a valid document.
- Partnership deed - If the MSME is a partnership business, it needs to submit the partnership deed. If the project comes under a company, the certificate of incorporation, a duplicate of the memorandum of associations, and articles of associations need to be submitted. Additionally, the documents of the resolution passed during one of the previous meetings signed by the director must be submitted.
- Machinery Licence - In some cases, the company owner has to provide the licence of the machinery used at the manufacturing unit. It must be a government-issued Industrial License. You can also submit the bills for the purchased machinery and equipment.
- Address proof of the company - If the establishment is owned by the proprietor, documents such as Property tax receipt, lease deed, and possession letter are to be provided. In case the project is on rent, then documents such as the receipt of rent and no objection certificate issued by the landlord are enough.
Also Read: What Is The Difference Between TIN, VAT, PAN, DSC and DIN
MSME Registration Process
How to register for MSME?
The MSME registration in India is done through the government portal udyamregistration.gov.in. The portal offers two ways to register for MSME.
- Fresh entrepreneurs who have not yet registered under MSME.
- Entrepreneurs having already registered as EM-II or UAM either through assisted filling or direct method.
For Fresh MSME Registration
The entrepreneur must open the MSME home page and click on the “For new entrepreneurs who have not yet registered under MSME” button. The process of registration is carried further by entering the Aadhar details. This can be conducted in both ways.
The Registration process with PAN
- Once the “For new entrepreneurs who have not yet registered under MSME” button is selected, the registration page opens where the Aadhar details and the entrepreneur’s name needs to be entered.
- After filling in the necessary details, the “Validate and generate OTP” option must be selected.
- After the generated OTP is entered, the PAN verification page opens up.
- Once the PAN number is entered, the page auto-fills all the other details from the government database, leaving only the ITR details that need to be filled by the person registering.
- After entering the PAN details, a message saying “Udyam Registration has already been done through this PAN” appears on the screen. The entrepreneur then needs to select the “Validate PAN” option.
- Once the PAN verification is complete, the website redirects to the Udyam Registration form. Here, the entrepreneur needs to fill in personal details and details of the manufacturing plant or industry.
- After entering the details, the entrepreneur needs to click the “Submit and get final OTP” button.
- A message on successful registration along with a reference number is generated at this stage.
The MSME registered application takes a few days to get verified. Once the process is complete, the entrepreneurs can download the MSME Registration Certificate.
Registration Process Without PAN
- Click the “For new entrepreneurs who have not yet registered under MSME” button on the homepage.
- After the registration page opens, enter the Aadhar number and establishment’s name.
- Once the details are entered, click the “Validate and Generate OTP” button. A One Time Password is generated and sent to the entrepreneur.
- Simultaneously, the PAN verification portal will open on the screen. If the entrepreneur does not have a PAN number, then choose the option “NO” under the “Do you have PAN” question on the screen. Then click on the Next button.
- It will then take you to the registration page where you will need to fill in your personal information and the company’s details carefully.
After filling in all the required details, click the “Final Submit” button. You will see a thank you pop up on your screen along with the registration number.
For Entrepreneurs already registered as EM-II or UAM either through assisted filling or direct method
- The entrepreneurs who have already filled the EM-II or UAM form and registered, log in to the home page and select the “For those having registration as EM-II or UAM” or “For those having registration as EM-II or UAM through assisted filling” option.
- The website will take you to the page where you will need to fill in the Aadhar number and other details.
- After filling in the details click the "Generate OTP button". You will see two options for receiving the OTP.
- You can choose to receive the OTP on your mobile number or email address.
- Click the “Validate and generate OTP” button. Enter the OTP you have just received and fill in the registration details.
The Udyam registration is now complete.
Steps to print the MSME registered certificate online
Once the MSME registration is complete, you can download the MSME registered certificate online.
- To download or print the certificate, log in to https://udyamregistration.gov.in/UA/PrintAcknowledgement_Pub.aspx in order to fill in the details.
- You need to enter the 12 digit UAM number in the provided space.
- In the next column, enter the same mobile number given in the Udyog Aadhar certificate.
- Once these procedures are complete, the page is redirected to the home page from where the certificate can be downloaded.
Benefits of MSME registration
Once the organisation is registered as an MSME, it is eligible for all the benefits offered under the MSME scheme. From getting government tenders to exemptions under the Direct Tax laws, the MSME registration is a must for a smooth operation of the enterprise.
Some of the major benefits include
- Surety of free loan- Once the company gets registered, according to the eligibility for the MSME scheme, entrepreneurs can apply for loans and get them approved at much lower interest rates (1% to 1.5%). Businessmen can get their loans approved without providing any documents of the assets.
- Subsidy on Patent- Getting a patent is a dream for most businessmen. However, most small businesses don't apply for a patent because of the heavy fee involved. But thanks to the MSME scheme, under which the MSME registered organisations can now apply for a patent by paying only half the rate. This 50% subsidy on IP can be availed once the registration process is complete.
- Benefits of Reservation- The Central policy of the Government Stores Purchase Programme has kept aside a certain amount of products that can only be manufactured by the MSME. This rule eliminates any chance of competition from large-scale multinational companies.
Also Read: 10 Tips for Successful Money Management for A Profitable Business
Types of MSME loans You Can Get
MSMEs can apply for a wide variety of free loans. Some of them are as follows.
- Merchant Cash Advance- A Merchant Cash Advance is useful for entrepreneurs, who want to pay large amounts to suppliers through a debit card or future credit transaction. Disbursal of such loans is done quicker compared to others.
- Working Capital Loans- These loans are often applied for managing daily business expenses such as rent, operational costs, and wages. No collateral is required for the approval of these loans. However, the entrepreneur needs to provide KYC details and Current Account statements for the past 6 months.
- Line of Credit- This is a preset borrowing credit limit that can be used when needed, paid back and borrowed again. This acts as a steady reserve for businesses. Entrepreneurs can use this capital to meet the daily needs of a business whenever they want. The interest is applied on the amount only when the loan is received. Loan amounts can range from Rs.50000 to Rs.1 Crore with a repayment tenure of one year.
- Invoice Financing- Based on the unpaid invoices, the bank or the lender can provide a loan to MSMEs. These loans help in maintaining a continuous inflow of income to fulfil business needs. Any organisation that has an annual turnover of more than Rs.24 Lakhs is eligible to apply for this loan.
From this article, we have evaluated the details regarding MSME registration, its required criteria and various steps needed for registration. We hope we have been able to make all the information regarding MSME registration requirements clear through this article.
Frequently Asked Questions
1. What is an MSME certificate?
MSME certificate is a valid document that provides proof of MSME registration. It contains the organisation’s name, registered number, and the verified seal.
2. When will the MSME certificate be issued?
The MSME certificate is issued in 2 to 3 working days after the registration is complete.
3. Who can register under MSME?
Any manufacturing and service sector business that belongs to the micro, small and medium category can register under MSME.
4. Is a PAN number necessary for MSME registrations?
Yes, a PAN number is necessary for the MSME registration. This rule was brought to action on 1/04/2021.
5. Is there a validity period for MSME certificates?
No, there is no validity period for MSME certificates. Until the business is financially stable and operational, the Udyam registration certificate will not expire.
6. Is an Aadhar number necessary?
Yes, the Aadhar number is necessary during the MSME registration process.
7. Are there any chances of getting rejected during the online application?
There are several reasons due to which online applications might get rejected. If an organisation has a low CIBIL rating, pending loans, a low inflow of cash, no proper business plan, incomplete submission of documents, and entered false information, their application might get interrupted.