Key MSME Registration Benefits in India 2021

Explore these major key MSME Registration benefits offered by the government. Read for the MSME law, criteria, & documentation needed to avail benefits.

The Micro, Small, and Medium Enterprises (MSME) sector is India's second-largest employer after agriculture. It accounts for 30% of the country's GDP. Consequently, the MSME sector is critical to our economic growth. Therefore, when the Covid-19 pandemic significantly impacted the economy, the government made numerous efforts to alleviate the state of affairs.

One of such efforts was focused on the MSME sector. The government is working on growing and promoting the sector as the economy progressively recovers. And as a result, any business that registers as an MSME can avail of some benefits of MSME registration.

Additionally, Amazon Business offers an online marketplace for businesses. So, this is the ideal window of opportunity for business owners to complete their MSME registrations and take advantage of the benefits of MSME registration.

The MSME Law: An Overview

As per the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, any buyer who fails to pay MSMEs within 45 days of the agreed-upon terms will be charged monthly compounded interest at three times the bank rate established by RBI. The Act was designed to aid in the growth and development of micro, small, and medium-sized businesses.

Recently, Nirmala Sitharaman, the Union Finance Minister, announced that manufacturing and services MSMEs will no longer be distinguished. Based on investments and turnovers, the definition of micro, small and medium enterprises was also refined. MSME is now defined as follows:

Micro- Undertakings that invest up to Rs 1 crore and a turnover under Rs 5 crore are considered micro-enterprises.

Small- Undertakings that invest up to Rs 10 crore and a turnover under Rs 50 crore are considered small enterprises.

Medium- Undertakings that invest up to Rs 20 crore and a turnover under Rs 100 crore are considered medium enterprises.

Eligibility for MSME Registration      

Businesses need to be eligible for registration before they could scalp the benefits of MSME registration. As manufacturing and service sectors are no longer segregated, any business intending to register as a small, micro, or medium enterprise, regardless of industry, must meet the following criteria.

Key Benefits of MSME Registration

To promote MSMEs, the government offers several MSME registration advantages. Some of the benefits of MSME registration are as follows:

Collateral-free Loans

As per the Government of India, all small and micro-business sectors in India now have access to collateral-free bank loans. This initiative provides funding to micro and small businesses, and both old and new businesses can benefit from it.

Subsidy on Patent Registration

Registered MSMEs are entitled to a staggering 50% subsidy on their patent registration fees. They must apply to the relevant ministry to avail of the subsidy.

Credit Linked Capital Subsidy

Under the Credit Linked Capital Subsidy Scheme, registered micro, small, and medium enterprises can get a 15% capital subsidy for technological upgrades. It is one of the major benefits of MSME registration because, it allows business owners to replace outdated and obsolete technology, equipment, and machinery with newer and better technology.

Industrial Promotion Subsidy

MSME-registered businesses are also eligible for a government-suggested subsidy for industrial promotion.

Protection Against Deferred Payments 

When a registered MSME sells products or services to a buyer, the buyer is obligated to pay on or before the agreed-upon payment date or within 15 days of receiving the goods or services. If the buyer delays payment for more than 45 days after accepting the products or services, the buyer will be required to pay interest on the agreed-upon price. The interest rate is three times the Reserve Bank of India's published rate.

Overdraft Interest Rate Exemption

As a way to help small businesses survive adversity, MSMED Act-registered companies can receive up to 1% off the interest rate on the overdraft according to banks' policies.

ISO Certification Charges Reimbursements

Another MSME registration benefit is that registered MSMEs can request reimbursement for the costs of acquiring ISO 9000, ISO 14001, or HACCP certifications. This MSME benefit was designed to encourage businesses to get ISO certification.

Ease Of Obtaining Government Tenders  

Occasionally, the government announces tenders open only to MSME Industries. As part of a Covid-19 relief package, the Finance Minister announced that foreign companies were undercutting small-sized domestic companies. Hence, the government would not accept global bids for contracts over Rs 200 crore.

Tax Benefits

One of the benefits of MSME registration is the ability to carry over the credit for Minimum Alternate Tax (MAT) for up to 15 years rather than the usual 10.

In addition to all of these points, Amazon Business offers additional benefits of MSME registration to business owners. Businesses with MSME registration can make bulk purchases from Amazon Business, India’s largest online e-commerce platform.

Business owners can also benefit from discounts and cashback offers for placing bulk orders on Amazon Business. With GST registration, buyers can save up to 28% from GST input tax credit. All the products on Amazon Business are available with E-Invoicing, which makes GST claims easier for the customers.

For those who don’t know, here is a blog on GST registration process.

Moreover, after purchasing from Amazon Business, MSME owners can pay using a host of payment methods – credit/debit cards, bank transfer, NEFT and RTGS payments. Buying from Amazon Business is most convenient for business owners, and it can very well be listed as one of the benefits of MSME registration.

List of Essential Documents for MSME Registration

The government offers a variety of MSME benefits and incentives to small and medium-sized businesses. Micro, small and medium firms must register under the MSMED Act of 2006 to receive MSME benefits in India. To register under the MSMED Act, enterprises need to check in to the Udyam Registration Portal to file Udyam Registration, previously known as Udyog Aadhar.

Udyam Registration is a straightforward, online registration process. To receive the registration certificate from the portal, proprietors need to submit several documents that will act as reliable credentials.

The documents required for MSME registration are listed below.

• As a first step, you must fill out an online application form and upload your passport-sized photograph, followed by verification using the e-Aadhar OTP.
• Aadhar Card - This is the most vital document. Providing Aadhar details is mandatory to register your business under the MSMED Act.
• PAN Card - Another equally important document is the PAN Card.

Other documents include:

Proof of income

•  Bills - You'll have to submit copies of sales bills for each finished product the company aims to sell, along with purchase bills for the acquisition of raw materials.
• Address Proof - Business address proof to denote the business physically exists is required to submit.
• If your enterprise is self-owned, you'll need an allotment letter, possession letter, lease deed, or a property tax receipt as proof of business address.
• If the business is located in a rented space, rent receipts and a NOC from the landlord, and paperwork proving the landlord's ownership of the property are required.

Partnership Deed/ MoA and AoA

• A partnership deed is required for MSME registration for partnership enterprises. If the partnership is registered, it will also be necessary to provide a registration certificate.
• If your enterprise is a 'company,' you'll need a copy of the Memorandum of Association (MoA) and Articles of Association (AoA), as well as a certificate of incorporation.
• There will also be a requirement to submit a copy of the resolution passed in the general meeting and the resolution authorizing the director to sign the MSME application.
• Any other credentials that the bank requests shall be furnished

In Conclusion

MSMEs are slowly but steadily becoming the backbone of our emerging economy. Through the MSMED Act, the government has implemented several subsidies, schemes, and incentive programs explicitly aimed at MSMEs. MSME benefits are available to businesses that have been registered under the MSMED Act.

Not only the Government of India but also the States and Union Territories have compiled their share of benefits of registration under MSMED Act. Tax breaks, power tariff breaks, and other forms of assistance are among them. The purpose of the lucrative benefits of MSME registration is to support and develop MSMEs while also encouraging them to register under the MSMED Act.

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