What is MSME Registration ?
Small Scale Industries (SSI) or Micro, Small and Medium Enterprises (MSME) can register themselves under the MSMED Act. It isn't necessary, but very beneficial to do so, as it only exists to offer benefits to those registered under it. These benefits include priority sector lending, excise and direct tax exemptions, capital investment subsidies and power tariff subsidies. To qualify as an MSME, manufacturing enterprises need to have investment of less than Rs. 10 crore in plant and machinery, while service enterprises must have no more than Rs. 5 crore invested in plant and machinery. If, at any time, you cross this investment limit, you need to cancel your registration under the MSMED Act.
6 Essential Facts on MSME Registration
What is an MSME Registration ?
Every nation’s economic hopes are pinned on its young, small businesses. The Indian government, with this in mind, offers numerous benefits to such organisations (cheaper credit, easy loan approval, tax exemptions, etc), so that they can achieve growth at a much faster pace and without enduring hardships. To avail of these benefits, the organisations that qualify must get an MSME or SSI Registration (regulated by the MSMED Act). This registration is among one of the easiest of government registrations to be granted.
Is MSME Registration voluntary or mandatory ?
The SSI Registration is only needed to avail of subsidies and benefits. It is absolutely voluntary. However, as it is a fairly easy registration to get quickly (provided you have a manufacturing plant or a commercial space where you render services), many business opt for it over other registrations.
Why should I apply before commencing operations ?
This is because you can avail of a Provisional SSI Registration Certificate (PRC). The PRC will enable the unit to obtain term loans and working capital under priority sector lending and make it easier to procure various NOCs and clearances from regulatory bodies, such as Pollution Control Board.
What documents are required for the application ?
You may apply for the PRC without an industrial license in case your unit is listed in Schedule-III of the Industrial Licensing Exemption Notification. Other units must first acquire an industrial license. The unit should also have obtained all other clearances, whether statutory or administrative. For example, a drug license under the drug control order or an NoC from Pollution Control Board, if required. The unit should not violate any locational restrictions in force. The unit should not be owned, controlled or subsidiary of any other industrial undertaking. The PRC is issued based on the application form. No field enquiry is made.
What are the advantages of SSI registration ?
The benefits range from cheaper bank loans, easy access to credit, quicker approvals from state and central government bodies, tax rebates, cheaper infrastructure, including electricity and VAT exemptions.
Why is it essential to maintain records ?
Any entity with an SSI Registration that fails to follow any regulations laid by the government will be deregistered. Also, in case you exceed the investment limits, as noted below, your firm’s registration will be cancelled.
You need to send in PAN cards, identity and address proofs of the proprietor/partners/directors. Private limited companies must also submit the Memorandum and Articles of Association, Form 32, Form 18 and Certificate of Incorporation, while Partnerships must submit the Partnership Agreement. Finally, the rental agreement for the office address, if it is rented, along with the electricity bill.
We will file your application with the relevant state office. Some additional documents may need to be submitted at this stage, as the procedure differs with each state. Some states require MSMEs to produce sale bills of machinery and municipal clearance.
You will be issued a provisional certificate (in case the unit has not commenced production) that is valid for five years. Once your plant is operational, a permanent certificate will be issued.