All You Need to Know About MSME Registration in IndiaOctober 21, 2021
The MSME benefits in India started by conceptualising the Micro, Small, and Medium Enterprises Development in 2006 for a company to enjoy the perks that can be availed as per the MSME Development Act of 2006. To encourage entrepreneurship, certain incentives are offered for MSME-registered companies. Therefore, companies should go ahead with MSME registration.
There are also several tax benefits available for companies after registration. Banks and other financial institutions offer lower interest rates for companies with MSME certificates. Similarly, under the Micro, Small, and Medium Enterprises Act, the registered companies get preference to take pa/rt in government tender auctions. MSME-registered companies are also eligible for government schemes and incentives.
Previous MSME Classification
As per the older act, companies eligible under MSME criteria were limited to a certain amount in capital investment, including the cost of machinery. However, the older limit was on the lower side, and many eligible companies could not take full advantage of the government incentives provided to MSME certificate holders.
Earlier, the lower limit for MSME certification hampered business growth since companies already a part of the scheme could not expand beyond the eligibility criteria set by the central government. To make things clearer, the following table of contents will give you a fair idea about the maximum capital investment along with the cost of machinery and annual turnover that was earlier allowed for companies registering for MSME.
As the business sector is growing, companies are required to raise their capital. As per the previous eligibility criteria for the MSME certificate, entrepreneurs had to keep their wealth, cost of machinery, and annual turnovers within limits set by the government. Moreover, due to the increase in demand for manufactured goods and certain services that had witnessed a rise, there was a need for revising the eligibility criteria for registration. Recent revisions have been made to enable companies to increase their capital investment for MSME registration and a revised annual turnover amount.
Revised MSME Eligibility Criteria
As per the revised plan initiated by the government, an organisation can register for Micro, Small, or Medium Enterprise, with increased amounts as eligibility criteria for MSME registration. For example, an enterprise with initial capital, machinery cost under one crore rupees, and an annual turnover not exceeding five crore rupees can be registered as a micro enterprise. Compared to the previous limit of ₹25 lakh rupees, micro enterprises have been awarded a larger limit for capital investment. The new upper limit will help them increase their business while they can avail benefits from the Ministry of MSME.
Similarly, a small enterprise eligible for an MSME certificate can increase their maximum capital investment and cost of machinery to 10 crore rupees. Small enterprises can also enjoy a full turnover of 50 crore rupees without losing their status as small enterprises under the MSME registration criteria.
Medium Enterprises classified under the MSME Act can invest a maximum of 50 crore rupees into their organisation for capital and machinery. Also, their annual turnover should not exceed two hundred and fifty crore rupees to avail government incentives and schemes for medium enterprises. The following table will help you understand the revised eligibility criteria amendment by the government for MSME registration.
MSME Registration Process
For an enterprise to register for an MSME certificate, the concerned person should visit the Udyam Registration portal. The initial registration process on the government’s website will be in the form of self-declaration. The company will be allotted a permanent identification number after fulfilling the necessary formalities. The format for filling out Udyam Registration is available on the website, and the process is completely paperless. The person filing the form is not required to have all the documents in the digitised version during form filling as the process of MSME registration will not require any uploading of documents.
However, before applying for an MSME certificate, the owner or the firm’s managing partner is required to have certain documents in hand. These include Aadhaar Card and PAN Card. Based on the type of the company, the Aadhaar Card of the following person will be necessary for Udyam Registration.
- Aadhaar Card of the proprietor for a Proprietorship Firm.
- Aadhaar Card of the managing partner for a Partnership Firm.
- For a Hindu Undivided Family, the Aadhaar Card of the Karta.
- In the case of an LLP, Cooperative Society, or a Trust, the Aadhaar Card of the authorised signatory will be required during the MSME registration process.
Along with the Aadhaar Card, the enterprise will have to enter the PAN card details for the organisation during the registration process. Remember, you do not need to upload any documents while filling the registration form. However, Aadhar and PAN card details are necessary for authentication. The person filling the MSME registration form will receive an OTP on the mobile number linked with the Aadhaar Card number entered into the portal.
Since the process is based on a self-declaration module, the classification of the company under the category of micro, small, and medium enterprise will be based on the ITR filed by the company. The ITR document will identify the cost of capital and turnover, and the enterprise will be awarded the certificate based upon the eligibility criteria mentioned in the MSME Act.
If the enterprise is newly established and does not have an ITR document under the firm’s name, the self-declared category will be defined. The Ministry may change the company’s status after completing the first financial year of the company when it will be required to file ITR. However, during the self-declaration of cost of investment and machinery, the company will need to enter the values as mentioned in the purchase invoice of plant and machinery irrespective of first hand or second-hand purchase.
An enterprise is required to update its information on the MSME website annually. The portal may request you to submit details of the ITR and GST returns for the previous financial year on a self-declaration basis. This is an important aspect for the Ministry of MSME to monitor the correct classification of the enterprise.
Based upon the information the organisation has provided, the government may place the company in a higher or a lower category depending on the capital and turnover of the company mentioned in the self-declaration form. The enterprise will be contacted about the change in their class.