MSME Registration
A total of 4.5 crore MSMEs are registered in India, as per the latest data. MSME plays an important role in the growth of the economy as they have a capital-output ratio, meaning that small investments result in a good growth rate. MSMEs are micro, small, and medium enterprises that are engaged in the manufacturing, processing, production, and preservation of goods or services. MSME registration gives companies tax benefits, loan choices, and better access to government contracts/tenders and schemes. The process of registering an enterprise as an MSME includes a lot of steps, and online Udyam Registration makes the process easier by allowing you to add personal and company details, bank information, and your choice of district. MSMEs not only support the growth of the nation but also play a significant role in generating employment and eliminating poverty by providing opportunities to economically disadvantaged groups. After registration, MSMEs have to comply with several mandatory requirements, such as adhering to the provisions of the MSMED Act, 2006, GST registration, shop registration, etc., to ensure the smooth operation of the business.
By understanding and leveraging schemes provided by the government, businesses can reach new heights and contribute to the growth of the country after registering with MSME.
What is MSME?
MSME stands for Micro, Small, and Medium Enterprises. These are small-scale businesses that are crucial for economic growth. They operate in various sectors including manufacturing, service, and trading. Aatma Nirbhar Bharat Abhiyan in 2020 categorized MSMEs on the basis of investment as:
- Micro Enterprise: It has investment in Plant and Machinery or Equipment upto Rs. 1 crore with a turnover upto Rs. 5 crores.
- Small Enterprise: It has investment in Plant and Machinery or Equipment upto Rs. 10 crores with a turnover upto Rs. 50 crores.
- Medium Enterprise: It has investment in Plant and Machinery or Equipment upto Rs. 50 crores with a turnover upto Rs. 250 crores.
Benefits of MSME Registration in India
MSMEs contributed 30.1% to India’s GDP and had a 45.73% share of export-related products in all exports in India. Registration offers several perks, including:
- Easier Access to Loans: MSME registered companies get the benefit of availing collateral free loans. Under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) both new and old businesses are eligible to avail this advantage. This scheme allows enterprises to invest in technology and grow their businesses.
- Access to Government Schemes: Registration of MSME opens doors for government schemes or programs like Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Prime Minister’s Employment Generation Programme (PMEGP), Micro and Small Enterprises – Cluster Development Programme (MSE-CDP) and Raising and Accelerating MSME Performance (RAMP). These schemes are designed to help MSMEs to continue to grow its businesses.
- Preference in Government Tenders: Registered MSMEs get preference in public procurement and are exempted from paying Earnest Money Deposits (EMD) in most of the tenders issued by government. The government has mandated that 25% procurement has to be from MSME with 3% reservation for women-led MSMEs. MSMSEs by taking the advantage can secure their bids for valuable projects, expand their business and income and contribute the nation.
- Reduced ROI from Banks: Unlike other businesses, MSMEs get cheaper business loans with low interest rates from the banks. Banks mostly give loans to MSMEs at 2-3% lower rate of interest.
- Subsidies on Business Costs: MSMEs receives subsidies from the government to upgrade machinery and adopt advance technology. MSMEs that are registered with MSME ministry can avail 50% discount on their patent registration costs. Additionally, many states in India offer reduced electricity tariffs to registered MSMEs.
- Protection Against Late Payments: The MSMED Act, 2006 protects MSMEs against late payments to ensure that they receive timely payments from their clients. Buyers are required to make payment within 15 days to MSMEs from the date of acceptance of products and services. Under the MSMED Act, 2006, MSMEs can charge three times the bank interest if payment from the buyer is delayed beyond 45 days.
- ISO Certification Reimbursement: ISO certificate increase the efficiency and reputation of MSMEs in the market. MSMEs are exempted from paying any ISO certificate fees if they send an application to the authority for registration of an ISO certificate.
- Growth Opportunities: MSMEs have access to international trade fairs, exhibitions, and programs organized by the Indian government to promote their area of work. Apart from participation, MSMEs get support and investment from the government to upgrade their technology used in business.
Requirements of MSME Registration in India
To apply for MSME, businesses have to meet the following requirements:
- Business Entity: The company will need to be categorized as a micro, small, or medium business, as per the MSME category standards based entirely on investment in plant and machinery or annual turnover (above-mentioned),
- Indian Citizenship: The business company owner has to be an Indian.
- Aadhaar Number: The business owner must hold an Aadhaar number, which acts as their proof of identity for the filing process.
By meeting these requirements, businesses can get the benefits of MSME registration in the Indian marketplace.
Eligibility Criteria for MSME Registration
To apply for MSME, the business must meet the eligibility standards based on the investment in plant and machinery or equipment and annual turnover. The criteria are as follows:
- Micro Enterprises: The investment in plant and tools or equipment should not exceed Rs. 1 crore, and the yearly turnover of the business should not exceed Rs. 5 crores.
- Small Enterprises: The investment in plant and tools or equipment should not exceed Rs. 10 crores, and the yearly turnover of the business should not exceed Rs. 50 crores.
- Medium Enterprises: The investment in plant and tools or equipment should not exceed Rs. 50 crores and the yearly turnover of the business should not exceed Rs. 250 crores.
- Private Limited or Public Limited Companies, Sole Proprietorship, Partnership Firms, and Limited Liability Partnerships (LLPs).
- Startups, Self Help Groups (SHGs), Co-operative Societies, Trusts, Business Owners, and Entrepreneurs.
These factors apply to both business and service enterprises. The selection criteria for MSME registration may change from time to time; therefore, it is advised that the latest criteria be checked before registering.
Documents Required for MSME Registration in India
MSME registration needs the filing of several important documents that are:
- Aadhaar Number: The Aadhaar number of the owner/proprietors of the business. It serves as proof of identity and address of the owner of the business.
- PAN Card: The PAN card of the business owner and the business are required for tax details and to show the legitimate presence of the company.
- Bank Account Details: The bank account information, including the IFSC Code of either the enterprise or the owner of the enterprise.
- Business Address Proof: Rent agreement, Sale deed, utility bills like electric bill to show the proof of address of the business.
- Photograph: A passport-size image of the enterprise owner is required for identification in the course of the filing procedure.
- Business Activity Details: A detailed document that describes the nature of business and business activities carried out by MSME.
- Turnover details: You need to attach the documents that show the business’ turnover details.
- NIC 2-Digit Code: This code is essential to categorize the business activity for MSME registration.
Process of MSME Registration in India
The following steps are needed to be followed for the MSME registration:
- Visit the Udyam Registration Portal: Access the official Udyam Registration Portal. New entrepreneurs and entrepreneurs that have EM-II registration have to click on ‘For New Entrepreneurs who are not Registered yet as MSME or those with EM-II.’
- Enter the Aadhaar Number: The next step is put Aadhaar No. of proprietor/owner of the business and then click on the ‘Validate and Generate OTP Button.’
- Enter the PAN Number: Enter the PAN number of the business.
- Enter the Business information: The next step is to fill out the information of the enterprise, which includes the name, area, and type of enterprise.
- Enter the Investment and Turnover records: Disclose the funding and turnover details of the enterprise. The funding in plant and equipment or machinery and annual turnover are important factors in determining the suitability of the enterprise for MSME registration.
- Upload the papers: Submit the required documents, which include the Aadhaar card, PAN card, and financial information. The Udyam Registration Portal does not require the posting of any files, papers, certificates, or proofs, as the registration procedure is based totally on self-statement. After filling the details, click on ‘Submit and Get Final OTP’ and enter OTP and submit the form.
- Submit the Application: After submitting the application, the application will be checked and if accepted, the enterprise/organization shall be given a unique identification number referred to as the “Udyam Registration Number.”
MSME Compliance
Registration is not an end, once a business is registered as a MSME, it has to adhere to certain compliances to maintain its registration and continue to enjoy the benefits. Compliance measures make sure that the registered enterprise operates legally, and file mandatory returns, and avail different benefits.
- MSME Act, 2006: MSMEs must meet with the terms and provisions of the MSME Act, 2006 that offers safety against late payments and other perks. Section 9 of the MSMED Act explains specific businesses for which MSME Form 1 is a vital legal requirement, and MSME registered companies have to send MSME Form 1 twice a year to the Ministry of Corporate Affairs (MCA) and show unpaid payments to MSMEs in their yearly financial records.
- Update Udyam Registration: MSMEs are required to update their Udyam Registration details if there is a change in any one of the following:
- Income Tax Compliance: Filing an Income Tax Return is mandatory for all the businesses and individuals in India. MSMEs have to file ITRs annually by ensuring tax deductions under Section 80C, 80G of the Income Tax Act, 1961.
- Annual Returns: Registered MSMEs are required to file annual returns that outlines details of financial performance of the business in a financial year.
- Shops and Establishment Act: MSMEs have to comply with the rules and regulations of the Shops and Establishment Act, which sets out working hours, breaks, and other hiring conditions.
- Professional Tax Registration: MSMEs are needed to register for professional tax in the state where they operate their business.
- GST Registration: MSMEs with an annual turnover of more than Rs. 40 lakhs (for goods) Rs. 20 lakhs (for services), Rs. 10 lakh for good and services in special areas are needed to apply for GST.
- The business has transited from one category to another
- Change in business name, address, or ownership
- Annual Turnover of business
- Maintain Financial Records: Post registration, MSMEs are required to maintain and update accurate records of:
- Balance sheets and profit and loss accounts
- Record of investments in plants and machinery or equipment
- Invoices and Bank Statements
Compliance is important for MSMEs to ensure their long-term success and growth. Failure to meet these rules can result in fines, legal penalties, and social damage. Compliance helps MSMEs build their reputation, win the trust of their customers, investors, and other partners, and create a level playing field for all market players.
Why Choose Audit Needs for MSME Registration?
Audit Needs is a top provider of MSME registration services in India, providing a range of service post registration which makes it a great choice for businesses who are looking to register their businesses as MSME. With over more than 50,000+ clients, our team of experts help and support you throughout the filing process to ensure that you don’t miss out on anything.
Audit Needs provides tailored solutions designed to meet the needs of each client to ensure that the MSME Registration process fits perfectly with the unique requirements of the business and clients. We care about you and your budget and, therefore, provide our services at a very affordable rate. Our 24/7 support is designed to help you with the registration process and your doubts. We offer a quick response to make sure that our client doesn’t have to face inconvenience and make the registration process smooth and efficient for you.
MSME Registration
A total of 4.5 crore MSMEs are registered in India, as per the latest data. MSME plays an important role in the growth of the economy as they have a capital-output ratio, meaning that small investments result in a good growth rate. MSMEs are micro, small, and medium enterprises that are engaged in the manufacturing, processing, production, and preservation of goods or services. MSME registration gives companies tax benefits, loan choices, and better access to government contracts/tenders and schemes. The process of registering an enterprise as an MSME includes a lot of steps, and online Udyam Registration makes the process easier by allowing you to add personal and company details, bank information, and your choice of district. MSMEs not only support the growth of the nation but also play a significant role in generating employment and eliminating poverty by providing opportunities to economically disadvantaged groups. After registration, MSMEs have to comply with several mandatory requirements, such as adhering to the provisions of the MSMED Act, 2006, GST registration, shop registration, etc., to ensure the smooth operation of the business.
By understanding and leveraging schemes provided by the government, businesses can reach new heights and contribute to the growth of the country after registering with MSME.
What is MSME?
MSME stands for Micro, Small, and Medium Enterprises. These are small-scale businesses that are crucial for economic growth. They operate in various sectors including manufacturing, service, and trading. Aatma Nirbhar Bharat Abhiyan in 2020 categorized MSMEs on the basis of investment as:
- Micro Enterprise: It has investment in Plant and Machinery or Equipment upto Rs. 1 crore with a turnover upto Rs. 5 crores.
- Small Enterprise: It has investment in Plant and Machinery or Equipment upto Rs. 10 crores with a turnover upto Rs. 50 crores.
- Medium Enterprise: It has investment in Plant and Machinery or Equipment upto Rs. 50 crores with a turnover upto Rs. 250 crores.
Benefits of MSME Registration in India
MSMEs contributed 30.1% to India’s GDP and had a 45.73% share of export-related products in all exports in India. Registration offers several perks, including:
- Easier Access to Loans: MSME registered companies get the benefit of availing collateral free loans. Under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) both new and old businesses are eligible to avail this advantage. This scheme allows enterprises to invest in technology and grow their businesses.
- Access to Government Schemes: Registration of MSME opens doors for government schemes or programs like Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Prime Minister’s Employment Generation Programme (PMEGP), Micro and Small Enterprises – Cluster Development Programme (MSE-CDP) and Raising and Accelerating MSME Performance (RAMP). These schemes are designed to help MSMEs to continue to grow its businesses.
- Preference in Government Tenders: Registered MSMEs get preference in public procurement and are exempted from paying Earnest Money Deposits (EMD) in most of the tenders issued by government. The government has mandated that 25% procurement has to be from MSME with 3% reservation for women-led MSMEs. MSMSEs by taking the advantage can secure their bids for valuable projects, expand their business and income and contribute the nation.
- Reduced ROI from Banks: Unlike other businesses, MSMEs get cheaper business loans with low interest rates from the banks. Banks mostly give loans to MSMEs at 2-3% lower rate of interest.
- Subsidies on Business Costs: MSMEs receives subsidies from the government to upgrade machinery and adopt advance technology. MSMEs that are registered with MSME ministry can avail 50% discount on their patent registration costs. Additionally, many states in India offer reduced electricity tariffs to registered MSMEs.
- Protection Against Late Payments: The MSMED Act, 2006 protects MSMEs against late payments to ensure that they receive timely payments from their clients. Buyers are required to make payment within 15 days to MSMEs from the date of acceptance of products and services. Under the MSMED Act, 2006, MSMEs can charge three times the bank interest if payment from the buyer is delayed beyond 45 days.
- ISO Certification Reimbursement: ISO certificate increase the efficiency and reputation of MSMEs in the market. MSMEs are exempted from paying any ISO certificate fees if they send an application to the authority for registration of an ISO certificate.
- Growth Opportunities: MSMEs have access to international trade fairs, exhibitions, and programs organized by the Indian government to promote their area of work. Apart from participation, MSMEs get support and investment from the government to upgrade their technology used in business.
Requirements of MSME Registration in India
To apply for MSME, businesses have to meet the following requirements:
- Business Entity: The company will need to be categorized as a micro, small, or medium business, as per the MSME category standards based entirely on investment in plant and machinery or annual turnover (above-mentioned),
- Indian Citizenship: The business company owner has to be an Indian.
- Aadhaar Number: The business owner must hold an Aadhaar number, which acts as their proof of identity for the filing process.
By meeting these requirements, businesses can get the benefits of MSME registration in the Indian marketplace.
Eligibility Criteria for MSME Registration
To apply for MSME, the business must meet the eligibility standards based on the investment in plant and machinery or equipment and annual turnover. The criteria are as follows:
- Micro Enterprises: The investment in plant and tools or equipment should not exceed Rs. 1 crore, and the yearly turnover of the business should not exceed Rs. 5 crores.
- Small Enterprises: The investment in plant and tools or equipment should not exceed Rs. 10 crores, and the yearly turnover of the business should not exceed Rs. 50 crores.
- Medium Enterprises: The investment in plant and tools or equipment should not exceed Rs. 50 crores and the yearly turnover of the business should not exceed Rs. 250 crores.
- Private Limited or Public Limited Companies, Sole Proprietorship, Partnership Firms, and Limited Liability Partnerships (LLPs).
- Startups, Self Help Groups (SHGs), Co-operative Societies, Trusts, Business Owners, and Entrepreneurs.
These factors apply to both business and service enterprises. The selection criteria for MSME registration may change from time to time; therefore, it is advised that the latest criteria be checked before registering.
Documents Required for MSME Registration in India
MSME registration needs the filing of several important documents that are:
- Aadhaar Number: The Aadhaar number of the owner/proprietors of the business. It serves as proof of identity and address of the owner of the business.
- PAN Card: The PAN card of the business owner and the business are required for tax details and to show the legitimate presence of the company.
- Bank Account Details: The bank account information, including the IFSC Code of either the enterprise or the owner of the enterprise.
- Business Address Proof: Rent agreement, Sale deed, utility bills like electric bill to show the proof of address of the business.
- Photograph: A passport-size image of the enterprise owner is required for identification in the course of the filing procedure.
- Business Activity Details: A detailed document that describes the nature of business and business activities carried out by MSME.
- Turnover details: You need to attach the documents that show the business’ turnover details.
- NIC 2-Digit Code: This code is essential to categorize the business activity for MSME registration.
Process of MSME Registration in India
The following steps are needed to be followed for the MSME registration:
- Visit the Udyam Registration Portal: Access the official Udyam Registration Portal. New entrepreneurs and entrepreneurs that have EM-II registration have to click on ‘For New Entrepreneurs who are not Registered yet as MSME or those with EM-II.’
- Enter the Aadhaar Number: The next step is put Aadhaar No. of proprietor/owner of the business and then click on the ‘Validate and Generate OTP Button.’
- Enter the PAN Number: Enter the PAN number of the business.
- Enter the Business information: The next step is to fill out the information of the enterprise, which includes the name, area, and type of enterprise.
- Enter the Investment and Turnover records: Disclose the funding and turnover details of the enterprise. The funding in plant and equipment or machinery and annual turnover are important factors in determining the suitability of the enterprise for MSME registration.
- Upload the papers: Submit the required documents, which include the Aadhaar card, PAN card, and financial information. The Udyam Registration Portal does not require the posting of any files, papers, certificates, or proofs, as the registration procedure is based totally on self-statement. After filling the details, click on ‘Submit and Get Final OTP’ and enter OTP and submit the form.
- Submit the Application: After submitting the application, the application will be checked and if accepted, the enterprise/organization shall be given a unique identification number referred to as the “Udyam Registration Number.”
MSME Compliance
Registration is not an end, once a business is registered as a MSME, it has to adhere to certain compliances to maintain its registration and continue to enjoy the benefits. Compliance measures make sure that the registered enterprise operates legally, and file mandatory returns, and avail different benefits.
- MSME Act, 2006: MSMEs must meet with the terms and provisions of the MSME Act, 2006 that offers safety against late payments and other perks. Section 9 of the MSMED Act explains specific businesses for which MSME Form 1 is a vital legal requirement, and MSME registered companies have to send MSME Form 1 twice a year to the Ministry of Corporate Affairs (MCA) and show unpaid payments to MSMEs in their yearly financial records.
- Update Udyam Registration: MSMEs are required to update their Udyam Registration details if there is a change in any one of the following:
- Income Tax Compliance: Filing an Income Tax Return is mandatory for all the businesses and individuals in India. MSMEs have to file ITRs annually by ensuring tax deductions under Section 80C, 80G of the Income Tax Act, 1961.
- Annual Returns: Registered MSMEs are required to file annual returns that outlines details of financial performance of the business in a financial year.
- Shops and Establishment Act: MSMEs have to comply with the rules and regulations of the Shops and Establishment Act, which sets out working hours, breaks, and other hiring conditions.
- Professional Tax Registration: MSMEs are needed to register for professional tax in the state where they operate their business.
- GST Registration: MSMEs with an annual turnover of more than Rs. 40 lakhs (for goods) Rs. 20 lakhs (for services), Rs. 10 lakh for good and services in special areas are needed to apply for GST.
- The business has transited from one category to another
- Change in business name, address, or ownership
- Annual Turnover of business
- Maintain Financial Records: Post registration, MSMEs are required to maintain and update accurate records of:
- Balance sheets and profit and loss accounts
- Record of investments in plants and machinery or equipment
- Invoices and Bank Statements
Compliance is important for MSMEs to ensure their long-term success and growth. Failure to meet these rules can result in fines, legal penalties, and social damage. Compliance helps MSMEs build their reputation, win the trust of their customers, investors, and other partners, and create a level playing field for all market players.
Why Choose Audit Needs for MSME Registration?
Audit Needs is a top provider of MSME registration services in India, providing a range of service post registration which makes it a great choice for businesses who are looking to register their businesses as MSME. With over more than 50,000+ clients, our team of experts help and support you throughout the filing process to ensure that you don’t miss out on anything.
Audit Needs provides tailored solutions designed to meet the needs of each client to ensure that the MSME Registration process fits perfectly with the unique requirements of the business and clients. We care about you and your budget and, therefore, provide our services at a very affordable rate. Our 24/7 support is designed to help you with the registration process and your doubts. We offer a quick response to make sure that our client doesn’t have to face inconvenience and make the registration process smooth and efficient for you.