The Micro, Small & Medium Enterprises Development (MSMED) Act 2006 came into effect from October 2nd 2006 for the upbringing of this sector in India.
Presently, the MSME sector holds a share of 50% of India’s total exports and 45% of the country’s total industrial employment. Also, the sector as a whole manufactures more than 6000 types of products. As per official data, the count of companies registered under the MSME Act are-
- 05 million micro enterprises.
- 33 million small enterprises.
- 5000 medium enterprises.
Uttar Pradesh has the highest number of MSME registrations, holding a giant share of 14.20% in the total number of MSMEs across the country. UP is followed by West Bengal, which has a share of 14%. Tamil Nadu along with Maharashtra lies at the 3rd position with an 8% share.
Classification of a micro, small and medium enterprise
MSMEs are of 2 categories, namely, manufacturing and services. An enterprise is classified as micro, medium and small based on their scale of investment.
For the manufacturing sector, the investment brackets are-
- Micro – Below Rs. 2.5 million.
- Small – Between Rs. 2.5 million and Rs. 50 million.
- Medium – Between Rs. 50 million and Rs. 100 million.
For the services sector, the investment brackets are-
- Micro – Below Rs. 1 million.
- Small – More than Rs.1 million, but less than Rs. 20 million.
- Medium – More than Rs. 20 million, but less than Rs. 50 million.
The threshold investment limits are applicable as set by the Micro, Small and Medium Enterprises Development Act (MSMED), 2006. All other norms related to MSME registrations are also mentioned under this Act.
Checklist of important documents for MSME registration
It is important to organise and keep your documents ready before opting for the MSME registration process.
Following is the list of documents required for the same –
- Proof of business address
If you are the owner of your business premises, proof of business address could be documents like possession letter, allotment letter or a receipt of property tax.
In case the business premises are rented, you would be required to submit utility bills, a receipt of rent, and a NOC (No Objection Certificate).
- Partnership deed
If the enterprise is established on a partnership basis, a partnership deed has to be provided while filling the MSME registration form.
- Purchase bill and sales bill
These documents are evidence of your business transactions. A purchase bill is a receipt received when buying raw materials while a sales bill is one generated from the supply of products.
- Industrial license
It is issued by the Government of India, and is a document that proves the authenticity of your business.
Keeping all these documents can help you avoid delays in the registration and take one step closer to availing the benefits of MSME registration.
Benefits of registering your business as an MSME
The government offers certain benefits to the micro, small and medium enterprises. The MSME registration benefits are as follows-
- Relaxation on the interest rates and other benefits of MSME loans from financial institutions and NBFCs can be enjoyed.
- Easier for enterprises and business houses registered under the MSME to avail license and certifications faster.
- MSMEs are one step closer to concessions, credits and rebates.
- MSMEs save tax on income received from the business by enjoying various rebates. Minimum Alternate Tax (MAT) credit can be claimed up to 15 years.
- Access to several government tenors, which are not accessible to other enterprises
The benefits are extended if you avail a business loan to fund your enterprise. A substantial amount up to Rs. 30 Lakh can be borrowed for business-related expenses.
Abiding by the above checklist and registering your MSME will enable you to enjoy the benefits mentioned below. Note that there is no MSME registration fees required when registering your business, which is another advantage you enjoy.