MSME stands for Micro, Small and Medium Enterprises. These include start-ups and other business initiatives which are comparatively small in budget and have limited operations.
Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. MSMEs not only play a crucial role in providing large employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural & backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income and wealth. MSMEs are complementary to large industries as ancillary units and this sector contributes enormously to the socio-economic development of the country.
MSMEs are categorized as:
Manufacturing Enterprises: The enterprises engaged in the manufacturing or production of goods. The Manufacturing Enterprises are defined in terms of investment in Plant & Machinery and turnover.
Service Enterprises:The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment and turnover.
As per the revised composite criteria notified by the Union Goverment which came into effect since 01.07.2020.
Composite Criteria: Investment in Plant & Machinery/equipment and Annual Turnover
|Manufacturing Enterprises and Enterprises rendering Services||Investment in Plant and Machinery or Equipment: Not more than Rs.1 crore and Annual Turnover ; not more than Rs. 5 crore||Investment in Plant and Machinery or Equipment: Not more than Rs.10 crore and Annual Turnover ; not more than Rs. 50 crore||Investment in Plant and Machinery or Equipment: Not more than Rs.50 crore and Annual Turnover ; not more than Rs. 250 crore|
The registration of MSMEs is termed as “Udyam Registration” and an e-certificate namely “Udyam Registration Certificate” shall be issued on completion of registration process.
There is no differentiation in investment criteria between a service and a manufacturing unit in the new classification that is to take effect from 01.07.2020.
The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS) was launched by the GOI to make available collateral-free credit to the micro and small enterprise sector. Both the existing and the new enterprises are eligible to be covered under the scheme. The Ministry of Micro, Small and Medium Enterprises, Government of India and Small Industries Development Bank of India (SIDBI), established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises.
Our first MSME benefit is priority lending. Whether you’re the proud owner of a cutting-edge technology business or a masala packing company, employing rural women, credit and loan is something that your business will inevitably require for long- and short-term financing. Banks, by virtue of the directions issued by the Reserve Bank of India, have certain earmarked funds that have to mandatorily be given to MSME businesses. Producing MSME certificate benefits to entitle one to avail this loan on a priority basis with fewer hassles.
In the absence of collateral security (any property/cash given as a security against a loan), many business owners may find it extremely hard to secure a loan for starting in their industry. However, with an MSME Registration, all banks are specifically instructed to offer loans at interest rates lower than the usual and one may be able to avail this benefit from several banking institutions for their financing needs.
Enterprises that have MSME Registration are eligible for Industrial Promotion Subsidy as may be prescribed by the Central and state Government in this behalf
The Government of India organizes several exchange programs, craft fairs, exhibitions, and trade-related events internationally. Being categorized as a micro, small or medium enterprise gives access to all of these platforms for international cooperation on trade-related aspects with different countries and fosters new business connections. The government also incentivizes the export of goods and services by MSMEs by way of subsidies, tax exemption, and technical support.
Every Union Ministries/Departments/PSUs shall set an annual goal of minimum 20 per cent of the total annual purchases of the products or services produced or rendered by MSEs. Out of annual requirement of 25% procurement from MSEs, 5% is earmarked for units owned by Schedule Caste /Schedule Tribes.
The units registered under Single Point Registration Scheme of NSIC are eligible to get the following benefits under “Public Procurement Policy for Micro & Small Enterprises (MSEs).
The Ministry of Micro, Small and Medium Enterprises gives protection to MSME Registered Business against delay in payments from Buyers and right of interest on delayed payment through conciliation and arbitration and settlement of dispute be done in minimum time. If any micro or small enterprise that has MSME registration, supplies any goods or services, then the buyer is required to make a payment on or before the date agreed upon between the buyer and the micro or small enterprise. In case there is no payment date on the agreement, then the buyer is required to make payment within fifteen days of acceptance of goods or services. Further, in any case, a payment due to a micro or small enterprise cannot exceed forty-five days from the day of acceptance. Then the interest should be paid by the buyer to MSME and the penal interest chargeable for delayed payment to a MSME enterprise is three times of the bank rate notified by the Reserve Bank of India.
Enterprises that have MSME Registration Certificate can avail Concession on eletricity tariff.