Micro, Small and Medium Enterprises or MSME is based on the micro, small and medium enterprises development act (MSEMD) act, 2006 that defines the size of micro, small and medium enterprises in India.
According to this act, a business engaged in the manufacture of production, processing or preservation of goods with any industry is classified as:
● When the investment in plant and machinery is below 25 lakhs, it is classified as a micro-enterprise.
● In case the investment in plant and machinery is between 25 lakhs and 5 crores, then it is classified as a small enterprise.
● In case the investment in plant and machinery is between 5 crores and 10 crores, then it is classified as a medium enterprise.
The main responsibility of this act in promoting these industries lies with the state government. About 60 million people are employed in this sector over the country.
In October 2019, Union Minister Nitin Gadkari, made a revision & classified MSME's, based on the amount of turnover with no distinction between the manufacturing and service sectors.
Micro -Turnover up to Rs. 5.00 Crore
Small- Turnover Rs. 5.00 crore to 75.00 crore
Medium- Turnover Rs. 75.00 crore to Rs. 250 Crore
There are various kinds of business which comes under the MSME act, such as
The Manufacturing sector is the one that make & supply goods, some of them are:
Processed food industry
Other material goods
The Servicing sector provides services to customers. Service sector includes:
Electronics repair service
Business incorporation service
Earlier businesses used to apply for a government license had to fulfil the complex government requirement to move their license application forward. To reduce this flaw, the government introduced an online procedure to get entrepreneurs a recognition from the government with some extra benefits. Previously you had to fill up the Entrepreneurship Memorandum I (EM-I) and Entrepreneurship Memorandum II (EM-II) with the respective District Industrial Centre (DIC). The government came out with Udyog Aadhar Memorandum, wherein EM-I and EM-II were replaced by Udhyog Aadhar a 12 digit number which is unique to a business.
The Government of India is an Act for Micro, Small & Medium Enterprises to simplify the long tedious process & to ease the way of doing business.
Process of Online MSME Registration/now UDYOG AADHAR REGISTRATION
The firm owner has to apply online by filling an application form through MSME official website giving his details, business activity, bank details, and employment details if applicable.
There is a specific fee for online registration which when paid and on documents approval, a unique ID number is sent to the registered email.
PAN of an applicant
Name of the owner
Business Name Address
Type of business activities
Details of bank account
Copies of Sale Bill and Purchase Bill
Partnership Deed/ MoA and AoA
Copy of Licenses
Bills of Purchased machinery
Number of employees
Amount invested in the business
Any business can get MSME certification whether it is Sole Proprietorship, Partnership or any other business entity.
Easy loan without bank guarantee
Minimum interest loans at subsidized rates
Total support of government financially for participating in foreign exhibitions.
Easy entry to industrial estates in state, sales tax exemption, buyer preference on produced goods
Excise exemption scheme
Direct tax relief in the first few years of business
Banks and other financial institutions recognise MSMEs and have created special schemes for them like priority sector lending, lower bank interest rates. They are given benefit n case of delay in repayment
Preference during the tender process
Concessions in electricity, trademark registration, bank transactions, stamp duty registration, etc.
Provision of training facilities
Hire-purchase of machineries for use in MSME
Marketing assistance in both country and outside (exports)
Extended credit facilities
Industrial extension support and services
Availability of developed sites for warehouse construction
An MSME has to find out which loan scheme is best for your business, an MSME business funding scheme offered by a bank or NBFC. For banks, you need a collateral that fits the bill as security. NBFCs give more flexibility as they offer unsecured loans with least hassles.
Certain loan programs bring SME's at par to big sized companies to make them eligible for loans which wouldn't be otherwise possible.
MSMEs can directly control their output and customer interaction as compared to other companies having huge operations. The owner in an SME, may be considered in a position to have an examination of the product quality and further he can also make necessary recommendations for its improvement. This MSMEs are able to undertake proper risk management at an early stage helping their businesses move further ahead.
It also helps MSMEs easily accommodate to the changes in the business environment. As there is no existence of any formal ranking system it helps in speeding up the decision-making process. If the owner believes that his business is prone to certain challenges with their competitors, he can more quickly as he does not have to wait for the approval from others. This Act also reduces the chances of bankruptcy as the business owner has more time to develop his business than waste time in completing lengthy government formalities.
MSME contributes significantly to the industrial output and employment export of the economy. They are the backbone of our economy. They contribute significantly to the GDP of a country and provide employment to many unskilled and semi-skilled people, raising industrial output thereby extending support to bigger industries through the supply of raw materials, basic & finished goods components, etc.
The manufacturing sector produces more than 6,000 products contributing to about 8% of GDP besides 45% to the total manufacturing output and 40% to the exports of our country.
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