MSME | Micro Small & Medium Enterprises in India

Overview

The term MSME is often used to abbreviate Micro Small & Medium Enterprises; these are small-sized enterprises operating in the Manufacturing and Service sector. The category of these enterprises is determined considering the amount of investment made in a plant, machinery, or equipment (the criteria is now proposed to be revised considering the Investment and Annual Turnover as announced by FM N. Sitharaman on 13th May 2020). MSMEs are backbone of economic development in India, with its large population needing products and services. MSMEs are governed by the provisions of MSMED Act 2006.

Benefits available

1. Protection for timely payment: As per section 15 of the act, if the registered enterprise supplies goods or services, the payment for such supply shall be made by buyer on or before the date agreed upon between buyer and supplier. Provided that in no case the period agreed upon between supplier and the buyer in writing shall not exceed 45 days from the date of acceptance or the day of deemed acceptance. If the buyer fails to make the payment within 45 days, then notwithstanding anything contained in any agreement, the buyer shall also pay interest at the rate of three times the rate notified by RBI along with the amount due to the supplier .

2. Concessional Electricity: Enterprises registered under MSMED Act, can avail concessional electricity. To avail the benefit of concessional electricity the applicant shall produce the MSME Registration certificate to the electricity department.

3. Reduced IPR Filing Fee: The Department of Electronics and Information Technology (DeiTY) has launched a scheme entitled 'Support for International Patent Protection in E&IT (SIP-EIT)' to provide financial support to MSMEs and Technology Start-Up units for international patent filing. The scheme provides for reimbursement of total charges incurred in filing and processing of a patent application, the reimbursement limit has been set to the higher of following two:

• INR 15,00,000 per invention or
• 50% of the total charges incurred in filing and processing of patent

4. Availability of Loan: By virtue of RBI directives, banks have certain earmarked funds that have to mandatorily to be given to MSMEs. These loans can be availed by producing the MSME registration certificates.

5. Income tax Exemptions: MSMEs can avail the benefits of Presumptive taxation section 44AD or 44ADA under income Tax Act 1961 .

6. Reimbursement of ISO Certification Charges: The MSMEs can avail an exemption of all the expenses incurred for obtaining ISO Certifications.

7. Exclusive purchase and sheltering: As part of the MSME Market Development Assistance Scheme, the Central Government follows a Price and Purchase Preference policy. Wherein some items are listed under it for exclusive purchases by Central Government from the medium, micro and small units only.

Recently Finance Minister Nirmala Sitharaman announced few measures to make the Indian MSMEs 'atmanirbhar'. Some of the major announcements would include:

• INR 3 Lakh Crore worth of Collateral free loans
• Rs 20,000 crore subordinate debt
• Rs 50,000 crore equity infusion
• Revision of MSME definition
• Barring the global tenders in Government Procurement tenders worth INR 200 Crores
• Clearing MSME dues by government and central public sector enterprises

Definition of MSME

Existing Definition:

In accordance with the provisions of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified in two classes:

• Manufacturing Enterprises
• Service Enterprises

Proposed Definition:

On 13th May 2020, while delivering the economic package, which is part of Aatmanirbhar Bharat Abhiyan, Finance Minister Nirmala Sitharaman announced revision in the definition of MSME.

Now the definition would include Turnover of the enterprises apart from the Investment.

Registration

Documents required for registration

- Aadhaar Number
-Owners Name
- Name of Enterprises
- Type of Organization
- PAN
- Date of Commencement
- Bank Details
- Personal Details: Personal details such as Identity proof, Address proof etc.

Procedure of Registration

- Fill up the Application Form
- Make the online Payment
- Executive will process the application
- Receive the certificate on Mail