If you are planning to start a business any time soon, we are here to help you with the complete details about MSME registration from basics to advanced!
MSME Registration in India industries are the backbone of the economy of a growing country like India. When these industries thrive, the nation’s economy as a whole develops and thrives. These businesses are also referred to as SSIs or small-scale industries. The MSME Act enables registrations for either the manufacturing line or the service line, regardless of the company’s area of business. Although the government has not yet made this registration obligatory, it is advisable to do so because it offers several advantages in terms of taxation, business setup, access to credit, loans, etc. The MSME Act was founded in order to support, assist, and increase the competitiveness of micro, small, and medium-sized businesses.
Individuals are not eligible to apply for MSME registration in India. However, due to a maximum revenue threshold established by the government, not all businesses are eligible for MSME Registration. To be considered an MSME, a company must meet the eligibility for MSME registration in India.
Tax Benefits for MSME
Running a small business is exciting, but tax season can be daunting. Luckily, the Indian government offers a helping hand through various tax benefits specifically for MSMEs (Micro, Small and Medium Enterprises). These breaks can give your business a financial boost and help you reinvest in growth.
Here’s a breakdown of some key tax advantages available to MSMEs:
Get a head start: Newly incorporated MSMEs can qualify for a full tax exemption for up to 7 years under Section 80J. This gives you breathing room to establish your business without a hefty tax burden.
Tax holidays for specific sectors: If your MSME deals in areas like mineral oil, natural gas, or fertilizers, you might be eligible for a tax holiday under Section 80-IB. This means you won’t pay any income tax for a period of 5 years, giving you valuable capital to expand your operations.
Lower tax rates: As your business grows, you’ll still benefit from reduced tax rates. MSMEs with a turnover exceeding ₹50 Crore can enjoy a 25% tax rate compared to the standard corporate rate. This translates to more money you can invest back into your business.
Simplified GST compliance: The Goods and Services Tax (GST) can seem complex, but MSMEs with a turnover below ₹1.5 Crore can opt for the Composition Scheme. This simplified system reduces paperwork and offers lower tax rates.
Invest and save: Thinking about upgrading your equipment? MSMEs can claim a special deduction of 15% on the cost of new plant and machinery under Section 32AC. This incentivizes investment and helps you modernize your operations.
Smart capital gains management: Selling a long-term asset and generating capital gains? MSMEs can reinvest those gains in qualified startups and benefit from an exemption on capital gains tax under Section 54GB. This encourages investment in the broader entrepreneurial ecosystem.
Eligibility For MSME Registration in India
The Micro, Small & Medium Enterprises Development Act of 2006 states that MSMEs can be classified as part of the manufacturing sectors if they meet the following criteria:
- The investment doesn’t exceed ₹25 lakhs in the case of Micro Enterprises
- The investment exceeds ₹25 lakhs but doesn’t exceed ₹5 crores in the case of Small Enterprises
- The investment exceeds ₹5 crores but doesn’t exceed ₹10 crores in the case of Medium Enterprises.
For the service sectors, the eligibility for MSME registration is as follows:
- The investment doesn’t exceed ₹10 lakhs in the case of Micro Enterprises
- The investment exceeds ₹10 lakhs but doesn’t exceed ₹2 crores in the case of Small Enterprises
- The investment exceeds ₹2 crores but doesn’t exceed ₹5 crores in the case of Medium Enterprises.
Annual turnover has been introduced as a new component to the MSME definition by the Indian government, which also revised the investment requirement.
According to the revised definition, the eligibility criteria are as follows:
- The investment doesn’t exceed ₹1 crore, and the annual turnover doesn’t exceed ₹5 crores in the case of Micro Enterprises
- The investment doesn’t exceed ₹10 crores, and the annual turnover doesn’t exceed ₹50 crores in the case of Micro Enterprises
- The investment doesn’t exceed ₹20 crores, and the annual turnover doesn’t exceed ₹100 crores in the case of Micro Enterprises.
Documents Required For MSME Registration
- PAN Number
- Aadhar Number
- Business Address
- Basic Business Activity
- Bank Account Number
- NIC 2-digit code
- Annual Turnover Details (according to MSME’s new definition)
- Investment Details
- Copies of Purchase & Sales Bills
- Partnership Deed
- License Copies & Purchase Bills of Machinery
MSME Registration Fees
Users must access the Udyam Portal to register as an MSME. There are no costs associated with registering as an MSME. There is no charge for the MSME registration in India process.
Steps To Apply For MSME Registration in India Process
MSMEs are eligible for several advantages. However, you must register your company on the UAM (Udyog Aadhaar Memorandum) portal to take advantage of these benefits.
Now, you’re probably wondering ‘how to apply for MSME registration in India online.’ The procedure for registering an MSME is as follows:
- Fill out the registration form on the government website (UAM portal)
- Click the first link on the tab, ‘For New Businessmen who aren’t Already Registered as MSME/Those with EM-II’, if you are a new entrepreneur and have not yet registered as an MSME
- Enter your name and Aadhaar number, then click ‘Validate & Generate OTP’.
- Submit the PAN information and organization type after the verification is finished. Select the ‘No’ option if PAN is not an option
- Fill out the form’s fields 5 through 24 with your information
- To securely submit the form, enter the OTP that was sent to your mobile number and the verification code
- After successful registration, a ‘Thank You’ message with the registration number will appear
- The approval & registration will be completed within 2-3 days of the application form being submitted successfully
- Your MSME registration will be completed upon application approval, and you will receive the certificate through email.
Registration for Businessman Already Having Udyog Aadhaar Memorandum
- To complete the form, visit the government portal (UAM portal)
- Select the ‘For those who are already registered as UAM by Assisted filing’ or ‘For those who are registered as UAM’ tab
- Enter the Udyog Aadhaar number, choose the OTP option, and then click ‘Validate & Generate OTP’ on the following screen
- Enter the OTP that was sent to the email address or mobile number enrolled with UAM
- Fill out the MSME registration form with the necessary information, then submit it
- Within a few days of submitting the registration form successfully, the registration and approval will be completed
- You will receive the MSME certificate via email as soon as your application is approved.
Benefits of MSME Registration in India For Your Business
The following are some advantages of MSME registration in India:
- You will be able to get bank loans at the lowest possible interest rate. The interest rate is roughly 1% to 1.5 % less than the standard interest rate on loans
- The MAT (minimum alternate tax), which is creditable for up to 15 years, can also be used to receive tax benefits
- On establishing an industry or securing patents, there are numerous rebates and concessions offered
- ISO Certification fees can be reimbursed
- For MSMEs, credit assessments are simple
- Small and medium-sized firms must only pay a one-time settlement charge for any overdue amounts
- Obtain government contracts with ease because the government favours small and medium-sized businesses
- You can benefit from a number of government programs, including the Credit Linked Capital Subsidy Program, the Credit Guarantee Program, the Protection Against Delayed Payments Program, the Public Procurement Policy, and others
- MSMEs are eligible for priority sector loans from banks
- Subsidy for bar-coded registration
- Discount on the MSME’s electricity cost
- Special consideration is given to international trade fairs
- Support from the state government.
Conclusion
In emerging economies like India, MSMEs are seen as the foundation of the economy. MSMEs significantly contribute to the socio-economic growth of the nation, and this industry serves as an ancillary unit to the major industries. In comparison to other large industries, this industry plays a pivotal role in providing employment opportunities on a large scale at lower costs. It also aids in the industrialization of rural and underdeveloped areas and lessens regional disparities, ensuring a much more equal distribution of wealth and national income. Although MSME registration in India is not yet compulsory, there are several advantages for MSMEs who are registered in terms of credit options, loans, taxation, company setup, etc. So if your company requires assistance with MSME registration in india, Vakilsearch can get it done for you without any hassles!
FAQs on MSME Registration in India
Which businesses cannot be registered under MSME?
Large enterprises with turnover or investment exceeding the MSME thresholds cannot be classified as MSMEs. They typically have greater resources and operational capacities compared to micro, small, and medium-sized enterprises.
Who falls under MSME?
Microenterprises having the lowest thresholds, followed by small and medium-sized enterprises, reflecting their scale and operational capacities.
What is the turnover limit for MSME?
The turnover limit for MSME classification varies for micro, small, and medium enterprises. As per recent revisions, micro-enterprises have a turnover limit of up to ₹5 crore, small enterprises up to ₹50 crore, and medium enterprises up to ₹250 crore.
What are MSME rules?
MSME rules outline the criteria, benefits, and obligations for micro, small, and medium-sized enterprises. They specify eligibility criteria, registration processes, incentives, and compliance requirements to support and regulate the MSME sector's growth and development.
Until when is MSME registration in India valid?
MSME validity is indefinite. It is active until the business runs effectively.
Do we need to renew MSME every year?
MSME registration in Indiatypically does not require annual renewal. However, enterprises may need to update their information periodically, especially if there are changes in their operational scale, turnover, or other relevant factors affecting their MSME classification.
How to register MSME for free?
MSME registration in India can be done online through the government's Udyam Registration portal for free. Businesses need to provide basic information about their enterprise, such as Aadhaar and PAN details, to complete the registration process and avail of various benefits and incentives.
Can foreign-owned companies qualify for MSME registration in India?
Absolutely! Wholly-owned subsidiaries of foreign companies can register as MSMEs in India, provided they meet the investment and turnover criteria set for domestic companies.
What are the specific tax exemptions available to registered MSMEs?
Registered MSMEs benefit from various tax breaks, including income tax exemptions during initial years, lower tax rates, and simplified GST compliance.
What legal protections are afforded to MSMEs under the MSME Act?
The MSME Act provides easier access to credit, faster dispute resolution mechanisms, and reservation benefits in government procurement for registered MSMEs.
How often must MSMEs update their registration details?
There's currently no mandatory update requirement for MSME registration. However, it's advisable to update your details periodically to ensure accuracy and avoid delays in availing benefits.
