MSME stands for micro, small and medium enterprises and it also includes any enterprise that falls under any of these three categories. MSME enterprises are the backbone of any economy and they are considered as an engine of economic growth, promoting equitable development for all. Therefore, to support and to 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 the Central or State Government and the Banking Sector, the Registration under MSME is required.
Micro, Small and Medium-sized Enterprises in both the manufacturing as well as service sector can obtain the MSME Registration under the MSMED Act. Though the MSME registration is not statutory it is beneficial for the business as it provides a range of the benefits such as eligibility for lower rates of interest, excise exemption scheme, tax subsidies, power tariff subsidies, capital investment subsidies and other support.
The Registration under MSME is a two-step process viz:
Part-I (Registration before setup of a unit)
The MSME registration certificate enables a business entity to obtain certain privileges during the preoperative period such as:
- It helps in Obtaining the term loans and the working capital from financial institutions or banks under prior sector lending
- it helps to obtain the facilities for accommodation, land and other approvals etc
- It also helps to Obtain various necessary consents and the clearances from regulatory bodies such as the Pollution Control Board, Drug Control Board etc.
The Registration Certificate (RC) of MSME is issued for a maximum period of two years from its date of issue. The certificate is only valid till the date of commencement of the production or for a period of two years from the date of issue, whichever is earlier.
Part-II (Registration after the commencement of production)
The registration under MSME enables the business entity to obtain certain privileges during the post-operative period such as concessions in power tariff etc. The certificate is not mandatory and it can also be applied once the unit starts production. The Registration is to be obtained under either of the categories by filing Part I or Part II as the case may be.
Thus, before applying for registration under MSME, the following needs to adhere to
- all the required documents for MSME Registration.
- it must be checked that the unit has obtained all the necessary clearances/licenses whether they are statutory or administrative. e.g. drug license from the drug control board, NOC from Pollution Control Board, if required etc.
- It must be seen that the Unit does not violate any of the location restrictions that are in force, at the time of evaluation.
- it must also be seen that the Value of plant and machinery is within prescribed limits.
- It must also be checked that the Unit is not owned, controlled or subsidiary of any other industrial undertaking as per notification.
Thus in order to obtain the benefits that are provided under the MSMED Act, MSME registration is a must and all kinds of business entities such as proprietorship firm, partnership firm, LLP’s, and Public Limited Company can register. There are also many other advantages of MSME/SSI Registration.