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MSME - Revised Structure and benefits of Registration

CS Binit Thakur 
on 18 May 2020

LinkedIn


An overview on what are Micro, Small and Medium Enterprise and its structure on and after FM announcement made on 13.05.2020.

The Union Finance Minister Nirmala Sitharaman has announced measures to help businesses, including micro, small and medium enterprises (MSMEs), recover from the economic impact of the coronavirus (COVID-19) pandemic.

An overview on MSME - Revised Structure and benefits of MSME Registration

MSME are classified into two categories:

    

 1.

Manufacturing enterprise :

The enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the industries (Development and Regulation) Act, 1951 and are defined in terms of investment in Plant & Machinery.

2.

Service enterprise :

The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment.

Structure:

Before 14.05.2020, they are defined in term of investment in Plant and Machinery/ Equipment as below:

    

MICRO

SMALL

MEDIUM

Manufacturing Enterprises

upto Rs 25 Lakh

More than 25L and Less than Rs 5Cr

More than 5Cr and Less than Rs 10Cr

Service Enterprises

Upto Rs 10 Lakh

More than 10 Lakh and Less than Rs 2Cr

More than 2Cr and Less than Rs 5Cr

Now on and after 14.05.2020, they are defined in term of investment in Plant and Machinery/ Equipment “AND” turnover as below:

    

MICRO

SMALL

MEDIUM

Manufacturing Enterprises + Service Enterprises

Investment

upto Rs 1 Cr.

More than 1 Cr. and Less than Rs 10 Cr

More than 10 Cr and Less than Rs 20 Cr

Turnover

Upto Rs 5 Cr.

Upto Rs 50 Cr.

Upto Rs 100 Cr.

 

Computation of Investment limit in Plants & Machineries or in Equipment's for the purpose of MSMED Act, 2006.

  1. Equipment such as tools, jigs, dyes, moulds and spare parts for maintenance and the cost of consumables stores;
  2. Installation of plant and machinery;
  3. Research and development equipment and pollution controlled equipment;
  1. Power generation set and extra transformer installed by the enterprise as per regulations of the State Electricity Board;
  2. Bank charges and service charges paid to the National Small Industries Corporation or the State Small Industries Corporation;
  3. Procurement or installation of cables, wiring, bus bars, electrical control panels (not mounted on individual machines), oil circuit breakers or miniature circuit breakers which are necessarily to be used for providing electrical power to the plant and machinery or for safety measures;
  4. Gas producer plants;
  5. Transportation charges (excluding sales-tax or value added tax and excise duty) for indigenous machinery from the place of their manufacture to the site of the enterprise;
  6. Charges paid for technical know-how for erection of plant and machinery;
  7. Such storage tanks which store raw material and finished products and are not linked with the manufacturing process; and
  8. Fire fighting equipment.

Where the trade and/or trader's fallows under MSME?

There is no universal definition of the term “business”.

However generally in its broadest meaning it includes all activity by the community of suppliers of goods and services. The expression ‘business' is defined in the Income Tax Act, 1961, as any trade, commerce, manufacture or any adventure or concern in the nature of trade, commerce or manufacture.

Section 2(1) (e) of the LLP Act 2008 has defined the term ‘Business' to include every trade, profession, service and occupation'. However, the Act does not define the terms trade, profession, service and occupation.

Referring the matter of C.I.T., Trivandrum vs M/S Anand Theatres on 12 May, 2000, wherein the Hon'ble High Court observed that the buildings if that plays an important role in carrying on the business, then that would fall within the inclusive definition of the plant. So herein the term trade be read as Manufacturer.

Some key benefits of MSME Registration:

The registration scheme has no statutory basis. Units would normally get registered to avail some benefits, incentives or support given either by the Central or State Govt. Benefits available under the MSMED Act. Registration of Micro,

Small and Medium (MSM) Enterprises under MSMED Act is a very powerful medium to enjoy the regime of incentives offered by the Centre generally contain the following:

  1. Easy finance availability from Banks, without collateral requirement.
  2. Protection against delay in payment from Buyers and right of interest on delayed payment.
  3. Preference in procuring Government tenders.
  4. Stamp duty and Octroi benefits.
  5. Concession in electricity bills.
  6. Reservation policies to manufacturing / production sector enterprises.
  7. Time-bound resolution of disputes with Buyers through conciliation and arbitration.
  8. Reimbursement of ISO Certification Expenses.
  9. Credit prescription (Priority sector lending), differential rates of interest etc.
  10. Excise Exemption Scheme.
  11. Exemption under Direct Tax Laws.
  12. Financial Assistance for setting up testing facilities through NSIC.
  13. Subsidy on ISO Certifications.
  14. Subsidy on NSIC Performance and Credit ratings
  15. Participation in Government Purchase registrations
  16. Registration with NSIC
  17. Counter Guarantee from Government of India through CGSTI
  18. Waiver in Earnest Money (Security Deposit) in Government tenders
  19. Reduction in rate of Interest from banks (Subject to ratings)

Inputs are taken from hhttps://msme.gov.in

 

Disclaimer: The information is provided purely for informational and educational purpose only and based on my understanding/knowledge. This does not constitute any legal advice or legal opinions. Therefore, I cannot take any responsibility for the result or consequences of any attempt to use or adopt any of the information presented in this article.


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