Benefits Of MSME Registration

Government includes retail and wholesale trade as MSMEs, to benefit 2.5 crore traders

The Government of India on 2nd July 2021, revised the guidelines for MSMEs. Retail and Wholesale trade has now been included as Micro, Small and Medium Enterprises, this would mean that retail and wholesale trade will also now be able to avail benefits such as priority sector lending under RBI guidelines. The revised guidelines will benefit 2.5 crore retail and wholesale traders and will also allow them to register on the Udyam portal.

Several measures announced for the MSME sector over the past year will now be applicable to retail and wholesale traders as well. This move is also likely to enable smaller retailers and traders to avail of the Resolution Framework for COVID-19-related stress announced by the Reserve Bank of India wherein MSMEs with aggregate exposure of up to Rs 25 crore and classified as standard as of March 31, 2021, can avail of this restructuring scheme without being downgraded to another category of asset. However, a larger benefit is in the long term, since it will give retailers a benefit to get registered under MSME schemes hence formalizing more businesses.

What is MSME?

The Government of India has devised the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. Based on the recent amendments in the criteria for defining the MSME, the definition of micro, small and medium enterprises can be best understood as

BENEFITS OF MSME REGISTRATION

The following are a few benefits of obtaining MSME registration in India:

Bank Loans (Collateral Free)

Ministry of Micro, Small and Medium Enterprises, GoI and Small Industries Development Bank of India (SIDBI), established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement Credit Guarantee Fund Scheme for Micro and Small Enterprises. The corpus of CGTMSE is being contributed by GoI and SIDBI.

Collateral free loans up to a limit of Rs.50 lakh - for individual MSEs. Both existing and new enterprises are eligible to be covered under the scheme. Candidates meeting the eligibility criteria may approach banks/financial institutions, which are eligible under the scheme, or scheduled commercial banks and select Regional Rural Banks.

Subsidy on Patent Registration

Business enterprises registered under the MSME Act are given a subsidy of 50% for patent registration. This can be availed by sending an application to the respective ministry. 

Overdraft Interest Rate Exemption

Businesses or enterprises registered under MSME can avail a benefit of 1% on the Over Draft as mentioned in a scheme that differs from bank to bank.

Subsidy on Trademark filing

The rule offers 50% discount on official fees for MSE’s (small & medium enterprise) with respect to filing an application for registration for a trademark and for expedited processing of an application for registration of a trademark.

Industrial Promotion Subsidy Eligibility

Enterprises registered under MSME are also eligible for a subsidy for Industrial Promotion as suggested by the Government.

MSME Market Development Assistance (MDA)

As part of a comprehensive policy package for MSMEs, the MSME-MDA scheme has been announced with a view to increasing the participation of representatives of participating units. MDA is offered in three forms as mentioned below:

1. Participation in the international exhibitions/fairs - For registered small & micro manufacturing enterprises with DI/DIC.

2. Financial assistance for using Global Standards (GS1) in barcoding.

3. Recognised importance of barcoding and avail financial assistance through Office of the DC (MSME).

Purchase and Price Preference Policy - This is administered through the Single Point Registration Scheme of NSIC. Under this, 358 items are reserved for exclusive purchase from MSME by the Central Government. Other facilities include tender documents free of cost, exemption from earnest money and security deposit and 15% price preference in Central Government purchases - for individual MSMEs.

The scheme offers funding up to 75% in respect of to and fro air fare for participation by MSME entrepreneurs in overseas fairs/trade delegations. The scheme also has provision of funding for producing publicity material (up to 25% of costs), sector specific studies (up to Rs.2 lakh) and for contesting anti-dumping cases (50% up to Rs.1 lakh) - for individual MSMEs & associations. 

Protection against Payments (Delayed Payments)

At times, the buyers of services or products from the MSME’s tend to delay the payment. The Ministry of Micro, Small and Medium Enterprise lend a helping hand to such enterprises by giving them the right to collect interest on the payments that are delayed from the buyer’s side. The settlement of such disputes must be done in minimum time through conciliation and arbitration.

In case, if any MSME registered enterprise supplies any goods or services to a buyer then the buyer is required to make the payment on or before the agreed date of payment or within 15 days from the day they had accepted the goods and services from MSME or SCI registered business (if there is no mention of the date of payment).

If the buyer delays the payment for more than 45 days after accepting the products or services then the buyer has to pay compound interest along with interests (monthly) on the amount that was agreed to be paid. The interest rate is three times the rate that is notified by the Reserve Bank of India.

Concession on Electricity Bills

This concession is available to all the Enterprises that have the MSME Registration Certificate by providing an application to the department of the electricity along with the certificate of registration by MSME.

ISO Certification Charges Reimbursement

SME has emerged as dynamic and vibrant and is making significant contribution to industrial production, export and employment generation. The process of economic liberalisation and market reforms has opened up Indian SMEs to global competition. In order to enhance the competitive strength of SME, the Government has introduced an incentive scheme for their technological upgradation/quality improvement and environment management. The scheme provides incentives to those SMEs/ancillary undertakings who have acquired ISO 9000/ISO 14001/HACCP certification. 

Credit facilitation through bank for Technology Upgradation

The objective of the scheme is to facilitate technology upgradation in MSE by providing an upfront capital subsidy of 15% (on institutional finance of up to Rs. 1.0 crore availed by them) for induction of well established and improved technology in the specified 51 sub-sectors/products approved.

Public Procurement Policy- SAMBANDH

The Public Procurement Policy for Micro and Small Enterprises (MSME) order 2012 has mandated every Central Ministry/Department/PSU to set an annual goal for procurement from the MSE sector at the beginning of the year, with the objective of achieving an overall procurement goal of minimum 25 percent of the total annual purchases from the products or services produced or rendered by MSEs. Out of 25% target of annual procurement 4% is exclusively reserved for MSEs owned by SC/ST and 3% for MSEs owned by Women entrepreneurs.

MSME entrepreneurs on Government E Marketplace (GeM)

GeM is collaborating with various stakeholders from the Micro, Small and Medium Enterprises [MSME] ecosystem with special focus on entrepreneurs from the Scheduled Caste/ Schedule Tribes [SC/ ST]. The partnership is based on the objective of achieving the mandatory procurement goal of 25 percent from MSMEs and a sub target procurement of 4 percent goods and services from MSME entrepreneurs within SC/ ST communities, by all government departments and public sector enterprises [PSE]. This initiative seeks to encourage active participation of MSE sector in public procurement.

Availing the services on Trade Receivables e-Discounting System (TReDS)

TReDS is an electronic platform for facilitating the financing / discounting of trade receivables of Micro, Small and Medium Enterprises (MSMEs) through multiple financiers. These receivables can be due from corporates and other buyers, including Government Departments and Public Sector Undertakings (PSUs).

Sellers- Only MSMEs 

Buyers-Corporates, Government Departments, PSUs and any other entity 

Financiers- Banks, NBFC - Factors and other financial institutions as permitted by the Reserve Bank of India (RBI).

Click on the link for further details and FAQs.

NationalAwards (Individual MSEs)

The MoMSME with a view to recognising the efforts and contribution of MSMEs, gives National Awards annually to selected entrepreneurs and enterprises under the scheme of NationalAwards.Deserving entrepreneurs managing MSMEs having permanent registration/have filed Entrepreneurs’ Memorandum Part-II with notified authorities. The MSMEs should have been in continuous production/servicing at least during the last three years. Eligible enterprises may send nominations in the prescribed proforma (may download from the Ministry of MSME website) to Director, MSME-DI of the state where their MSME is registered/they have filed Entrepreneurs’ Memorandum (EM).

Click to know more about How to get a Udyam (MSME) Registration