Small enterprises known as MSMEs (Micro, Small, and Medium Enterprises) are what propel our economy ahead.MSMEs are the backbone of the economy and a key factor in the socioeconomic development of emerging countries like India. After agriculture, the Micro, Small, and Medium Enterprise (MSME) sector in India has the greatest employment rate. It contributes 30% to the country’s GDP. Therefore, the MSME sector is crucial to the economic development of our nation. Government support for small and medium-sized businesses has been around for a while. Additionally, the government works very hard to support MSMEs. This is why registering an MSME is important and advantageous.
The section that follows lists some of the key advantages of MSME registration in accordance with the relevant legislation.
- Bank Loans With No Collateral
Thanks to government measures, all small and microbusinesses in India now have access to loans without collateral. This programme assists micro and small businesses with funding applications and business loan applications. Benefits from this scheme are available to both new and existing businesses. The Small Industries Development Bank of India (SIDBI), which offers loans without collateral, established the Credit Guarantee Fund Trust for Micro and Small Enterprises.
- Reduced Interest Rates from Banks
In comparison to other businesses, an MSME registered business enjoys reduced interest rates. For the MSME sector, priority credit has been maintained. Since bank lending to MSMEs has increased to a certain level, they now enjoy low interest rates on business loans. Credit to micro and small businesses has to increase by 20% over the next two years. There has been a 10% yearly growth rate in microbusinesses. A minimum of 60% of the bank’s overall loans must go to the MSME sector.
- Protection from postponed payments
Customers of a registered MSME must make payment on or before the due date, or within 15 days of the vendor shipping their purchased item. The buyer will be obliged to pay interest on the agreed-upon sum if payment is not made within 45 days of accepting the goods or services. The interest rate is thrice the official rate as stated by the Reserve Bank of India. This is among the biggest advantages of MSME registration.
- Patent Registration Subsidy
A significant 50% subsidy, up to a maximum of 15 lakh INR per invention, has been made available to the business having the MSME certificate of registration. By submitting an application to the relevant ministry, this subsidy is available for patent registration.
- Gaining an advantage in international trade shows
For the purpose of commissioning MSME business delegations to foreign nations under the International Cooperation Scheme, financial assistance is provided to state/central government agencies, firms, registered associations, and organisations linked with MSME.
Its goal is to identify new innovative products that MSMEs can create, as well as to encourage MSMEs in India to take part in international expositions, trade shows, and buyer-seller interactions in order to learn about new technological developments. It also organises international workshops and events that are helpful to the MSME sector.
- Payment of ISO certification fees
If MSME registered enterprises submit an application to the proper government together with their registration certificate, they will not be charged any ISO certificate fees. ISO certification is necessary to raise the standards of MSMEs’ productivity throughout the bidding process.
- Startups pay no income tax
For the first three years out of seven, startups are entitled to a 100% tax exemption on profits as long as their annual turnover in a fiscal year does not exceed Rs 25 crores. For the remaining three years out of seven, no income tax is due. The Income Tax Act permits it. Companies that have been around for up to ten years are still considered startups for the purposes of this benefit. Additionally, the minimum alternative tax (MAT) credit can now be carried forward for up to 15 years rather than just 10 years. Throughout its early years, a startup benefits financially from its MSME designation.
- Reduction in electricity costs
With an MSME Registration Certificate, any business or industry is qualified to receive discounts on their electricity bills. Businesses can increase production and accept more orders as a result of the freedom from having to worry about capital expenses like power and maintenance. Micro, small, and medium-sized businesses can apply for the concession by sending a letter of request and their MSME registration certificate to the Department of Electricity.
- Priority when requesting approvals and licenses
When businesses present a Certificate of MSME Registration when applying for licences, licences, or registrations from the necessary authorities in any industry, they are given preference and the application process is made easier for them.
- 15% CLSS Subsidy
The Department of Micro, Small, and Medium Enterprises (MSME) administers the Credit Linked CGSTI Subsidy Scheme (CLCSS), an initiative that aids businesses in updating their technology. The Indian government launched this MSME registration incentive in 2000, and it offers a 15% discount up to a maximum of Rs. 15 lakhs. The scheme’s maximum loan limit is Rs. 100 lakh, which is used to determine subsidies.
List of Materials Required for MSME Registration
Please refer to the documentation provided below in order to register for MSME in India.
- Aadhar Card
- PAN Card
- A leasing contract
- Property-related documents
- cancellation of a cheque
- Business Registration
- Documentation of the registered business address
- Association Memorandum
- Association Bylaws
- Copies of the sales and purchase invoices
- Statement of Partnership
- Copies of licences purchased and sales receipts