MSME Registration In India: Procedure, Documents Required

MSME industries are the backbone of the economy. They are also known as Small Scale Industries (SSIs). The government of India provides an MSME registration to the industries classified by the government as Micro, Small and Medium Enterprises (MSME) in India. The MSME registration helps MSMEs to obtain various benefits provided by the government for their establishment and growth.

What is MSME Classification?

Initially, when the government introduced the MSME registration in 2006, the MSME classification was based on the investment criteria in plant and machinery or equipment. The government revised the MSME classification by inserting annual investment and annual criteria. Also, the distinction between the manufacturing and the services sectors under the MSME definition was removed.

The following is the current revised MSME classification, where the investment and annual turnover are to be considered for deciding if an entity is considered as an MSME:

Revised MSME Classification

What is MSME Udyam Registration? 

MSME registration is also called Udyam registration. The entities that fulfil the MSME classification can apply for MSME registration from the government portal, the Udyam portal. The MSME registration is entirely online and can be obtained from the Udyam registration portal. It is not mandatory for MSMEs to obtain this registration, but it is beneficial to get one’s business registered under this because it provides a lot of benefits in terms of taxation, setting up the business, credit facilities, loans etc.

MSME Registration Eligibility

All manufacturing, service industries, wholesale, and retail trade that fulfil the revised MSME classification criteria of annual turnover and investment can apply for MSME registration. Thus, the MSME registration eligibility depends on an entity’s annual turnover and investment. The following entities are eligible for MSME registration:

Individuals, startups, business owners, and entrepreneurs

Private and public limited companies

Sole proprietorship

Partnership firm

Limited Liability Partnerships (LLPs)

Self Help Groups (SHGs)

Co-operative societies

Trust

Documents Required for MSME Registration

The MSME registration documents are as follows:

Aadhaar card

PAN card

There are no MSME registration fees and it does not require proof of documents. PAN and GST-linked details on investment and turnover of enterprises will be taken automatically by the Udyam Registration Portal from the Government databases since the portal is integrated with Income Tax and GSTIN systems.

GST registration is not compulsory for enterprises that do not require a GST registration. However, enterprises that mandatorily need to obtain GST registration under the GST law, must enter their GSTIN for obtaining the MSME Registration or Udyam Registration.

MSME Registration Benefits

Below listed are the MSME registration benefits:

Due to MSME Registration India, bank loans become cheaper as the interest rate is very low, around 1-1.5%, much lower than interest on regular loans

It also allowed credit for minimum alternate tax (MAT) to be carried forward for up to 15 years instead of 10 years

Once registered the cost of getting a patent done, or the cost of setting up the industry reduces as many rebates and concessions are available

MSME registration helps to acquire government tenders easily as Udyam Registration Portal is integrated with Government e-Marketplace and various other State Government portals which give easy access to their marketplace and e-tenders

There is a One Time Settlement Fee for non-paid amounts of MSME

The MSME registration will help the MSMEs in availing the benefits of government schemes such as the Credit Guarantee Scheme, Credit Linked Capital Subsidy Scheme, Public Procurement Policy, and Protection against delayed payments, etc.

MSMEs are eligible for priority sector lending from banks

MSMEs get the benefit of a government security deposit waiver that is helpful while participating in e-tenders

Any number of activities, including service or manufacturing or both, may be added or specified in one MSME registration

Barcode registration subsidy

Exemption scheme from direct taxes

ISO certification fees reimbursement

Electricity bills concession

Special consideration in International trade fairs