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Micro, small and medium enterprises (MSMEs) are the largest contributors to our economic growth. They constitute over 90% of the total enterprises in most economies and are credited with generating the highest employment rates. In terms of value, the MSME sector accounts for about 45% of the manufacturing output and around 40% of the country’s total exports.
To facilitate the promotion, development and enhancement of the competitiveness of MSMEs, the Government of India has introduced various stimulus packages like cluster development, market development assistance, credit guarantee, financial assistance, International Cooperation Schemes, etc.
CLASSIFICATION
Enterprises have been classified under MSMEs based on their investments in plant and machinery or equipment. The investments in land and building will not be considered.
If it a manufacturing enterprises, the investment upto 25 lakhs will fall under micro enterprise category, the investment above 25 lakhs and upto 5 Crores will be medium enterprise and the investment above 5 crores and upto 10 crore shall fall under the medium enterprise category
If it is a service enterprise, the investment upto 10 lakhs will fall under micro enterprise category, the investment above 10 lakhs and upto 2 Crore will be medium enterprise and the investment above 2 crores and upto 5 crores shall fall under the medium enterprise category.
BENEFITS OF REGISTRATION
Enterprises registered under MSMEs are eligible for various benefits from the Government of India, Reserve Bank of India (RBI), etc. This includes subsidies, incentives, credit facilities from banks, and protection against delayed payments by buyers of goods/services.
Benefits to Micro & Small Enterprises
Protection against delayed payments by buyers of goods/services
Preference by ministries, departments, etc. to procure the goods and services that they manufacture or offer.
Certain goods can only be produced / manufactured by micro & small enterprises as per Government of India rules and regulations. At present, 21 products are reserved for exclusive manufacturing by micro and small enterprises.
Various schemes by the central government to promote enterprises registered as MSMEs.
Progressive credit policies by the RBI. This will ensure easy credit facilities to enterprises. About 10% and 40% of the net bank credit by foreign banks and domestic banks, respectively, should go to the micro and small enterprises sector.
Exemption upto Rs. 150 lakhs from excise duty, if total annual clearances or sales do not exceed Rs. 400 lakhs.
Subsidy for upgrading technology or techniques.
Reimbursement of expenses incurred in acquiring certain ISO certifications.
Subsidy for participation in international fairs for export promotion.
Benefits to Medium Enterprises
Various schemes by the central government to promote enterprises registered under MSMEs
RBI's credit policies for ensuring timely and smooth flow of credit.
Scheme for easy closure of business other than entities registered as companies.
MSME REGISTRATION
The Registration under MSMED Act, 2006 is optional for the SSI/MSME units. Taking into consideration the benefits available under the Act, it is recommended that every enterprise opts for the registration.
The registration process is by filing an online application, Udyog Aadhaar Memorandum (UAM). The application is linked with the Aadhaar Number of the proprietor/director of the enterprise. On successful submission of application, 12 digit Udyog Aadhaar Memorandum (MSME Certificate) will be generated.
PAYMENTS TO MSME
To ensure smooth cash flow to industries under the MSME sector, certain protective measures have been provided under the Micro, Small And Meduim Enterprises Development Act, 2006 (MSMED, Act 2006) to receive payments in time for services rendered or products sold by them.
Where any supplier supplies any goods or renders any services to any buyer, the buyer shall make payments within 45 days.
Where any buyer fails to make payment to the supplier, the buyer will be liable to pay compound interest at three times of the bank rate notified by the RBI.
Where any buyer is required to get his annual accounts audited, they have to specify the unpaid amount to MSMEs with interest in the annual statement of accounts.
The amount of interest paid or payable by a buyer to MSMEs shall not be allowed as deduction while comp buyer's income.
