In the early days of a business, entrepreneurs are looking for a license to get their business recognised by the government. One of the easier registrations to be granted is the MSME or SSI Registration or the Micro, Small & Medium Enterprises Registration or Small Scale Industries Registration. This is not the only reason it is popular among new businesses. It’s because this registration gives you access to numerous benefits.
Micro Enterprises: These are the smallest entities, of course. Micro manufacturing enterprises have investment of less than Rs. 25 lakh in plant and machinery, while micro service enterprises have less than Rs. 10 lakh invested in equipment.
Small Enterprises: Small manufacturing enterprises may have between Rs. 25 lakh and Rs. 5 crore invested in plant and machinery, while small service enterprises may have between Rs. 10 lakh and Rs. 2 crore invested in equipment.
Medium Enterprises: Medium manufacturing enterprises may have between Rs. 5 crore and Rs. 10 crore invested in plant and machinery, while small service enterprises may have between Rs. 2 crore and Rs. 5 crore invested in equipment.
For manufacturing entities, however, land and building cannot be counted toward the total investment. Also, the original cost of the equipment and plant and machinery is taken into account; depreciation cannot be factored in. Any business entity may apply, be it a partnership or a company. Sole proprietors may also apply.
What are the benefits of registering?
The registration schemes have no statutory basis. The units normally get registered to avail of some benefits. The incentives are funded either by the central or the state governments. The system of incentives that are offered by the centre generally contain the following:
a. Priority sector lending or lower rate of interest
b. Excise exemption scheme
c. Exemption under direct tax laws
d. Statutory support such as the reservation and Interest on Delayed Payments Act.
e. The States/UTs offer their own package of facilities and incentives for the small scale industries. They relate to the development of industrial estates, the tax subsidies, the power tariff subsidies, the capital investment subsidies and other support. The centre and the state both, whether under the law or otherwise, target their incentives and the support packages normally to units registered with them.
What are the main objectives of the registration scheme?
a. To tally and maintain a roll of the small industries to which the package of incentives and the support are targeted.
b. To provide a certificate that enables the units to avail of the statutory benefits, mainly in terms of protection.
c. To help serve the purpose of collection of the statistics.
d. To help create nodal centres at the centre, the state and the district levels to promote SSIs.
What is the procedure for registration?
The features of the present procedures are as given below:
1. A unit can apply for the Permanent registration Certificate (PRC) for an item that doesn’t require an industrial license. This means that the items that are listed in the Schedule-III and the items that are not listed in Schedule-I or Schedule-II of the licencing Exemption Notification. The units employing less than 50/100 workers with or without power can apply for the registration even for those items that are included in Schedule-II.
2. Unit applies for a Permanent Registration Certificate or PRC in the prescribed application form. No field enquiry is done and the PRC is issued.
3. The PRC is valid for a period of five years. If the entrepreneur is not able to set up the unit in this period, he can apply once again at the end of the five years.
4. Once the unit commences the production, it has to apply for a permanent registration on the prescribed form.
The following form basis of the evaluation:
1. The unit has to obtain all the necessary clearances statutory or administrative. Example. A drug license under the drug control order, a NOC from the Pollution Control Board, if needed etc.
2. The unit doesn’t violate any locational restrictions in force, at the time of evaluation.
3. The value of the plant and the machinery is within the prescribed limits.
4. The unit is not owned, controlled or a subsidiary of any other industrial undertaking as per the notification.
What You Need To Know
Micro enterprises are the smallest entities, of course. Micro manufacturing enterprises have investment of less than Rs. 25 lakh in plant and machinery, while micro service enterprises have less than Rs. 10 lakh invested.
Small manufacturing enterprises may have between Rs. 25 lakh and Rs. 5 crore invested in plant and machinery, while small service enterprises may have between Rs. 10 lakh and Rs. 2 crore invested.
Medium manufacturing enterprises may have between Rs. 5 crore and Rs. 10 crore invested in plant and machinery, while small service enterprises may have between Rs. 2 crore and Rs. 5 crore invested.
FAQs on SSI/MSME Registration
For how long is a Provisional Registration Certificate (PRC) valid?
The PRC expires at the end of five years, at which point you may re-apply if the unit is not yet operational, or if the unit exceeds investment limits set by the MSMED Act. Once you commence operations, you can apply for the Permanent License.
What factors are not counted as investment?
For a registration, total plant and machinery cost should be up to Rs. 25 crore for manufacturing units and Rs. 10 crore for service units. While calculating this number, the value of land and building will not be counted toward the total investment. Also, the original cost of the equipment and plant and machinery is taken into account. Depreciation cannot be factored in.
How does SSI/MSME help me get a loan from a bank?
All banks and other financial institutions recognise MSMEs and have created special schemes for them. This usually includes priority sector lending, which means that the likelihood of your business being sanctioned a loan is high. Bank loan interest rates will also be lower. There may also be preferential treatment in case of delay in repayment.
What benefits are given by state and central government?
Most states offer those units registered under the MSMED Act a subsidy on power, taxes, and entry to state-run industrial estates. In particular, there is a sales tax exemption in most states and purchase preferences on goods produced. Depending on your business, you may also enjoy an excise exemption scheme and exemption from certain direct taxes in the initial years of your business.
What are the main reasons for a small scale industry to get de-registered?
If a small scale unit violates regulations it can be liable for de-registration. The reasons for de-registration may be as follows:
If it crosses the investment limits.
If it starts manufacturing a new item or the items that require an industrial license or the other kind of a statutory license.
If it doesn’t satisfy the conditions of being controlled, owned or being a subsidiary of any other industrial undertaking.
What is a Provisional Registration Certificate (PRC)?
A Provisional registration Certificate is given for the pre-operative period and it enables the units to obtain the term loans and the working capital from the financial institutions/banks under priority sector lending. It helps to get/find facilities for accommodation, land and other approvals etc.it also helps to get numerous necessary NOCs and the clearances from the regulatory bodies such as the Pollution Control Board, Labour Regulations etc.
Why is the Permanent Registration Certificate needed?
The Permanent Registration Certificate enables the unit to obtain the following incentives/concessions:
1. The income-Tax exemption and the Sales Tax exemption as per the state government policy 8.
2. The incentives and the concessions in power tariff etc.
3. The price and the purchase preference for the goods produced.
4. The availability of the raw material depending on the existing policy.
5. The Permanent registration of tiny units should be renewed after 5 years.
8. What are special Benefits given by Banks for units with Permanent Registration Certificate?
All banks and the other financial institutions recognise the MSMEs and have created some special schemes for them. This typically includes a priority sector lending, which means that the possibility of your business being given a loan is high, and with a lower bank interest rates. There also may be a preferential treatment in case of a delay in repayment of the loan.
9. Are there any tax benefits for having a Permanent SSI registration?
Yes, depending on the nature of the business, there may be Excise Exemption Scheme as well as the exemption from certain Direct Taxes in the beginning/initial years of the business.
How long does it take to get SSI or MSME registration done?
The time taken for SSI or MSME registration takes about 5 to 20 day depending on the state in which the industry is located.
What are the benefits of a Provisional SSI registration?
The benefits of getting a provisional registration are listed below: The material needed for the construction of the building or the factory or will be available to the factory at a subsidized rate from the government. Apply for Municipal Corporation License & power connection. With the issue of the provisional registration a company will be able to get all the clearances from the concerned authorities without too much delay.