Why MSME Registration is Sufficient Enough for Small Startup ?
“Courage is resistance to fear, mastery of fear, not absence of fear.” - Mark Twain
The Micro-Small and Medium Enterprises (MSME) are small sized entities, defined in terms of their size of investment. The MSMEs are classified in terms of investment made in plant and Machineries if they are operating in the manufacturing sector and investment in equipment for service sector companies. These types of enterprises perform a critical role in the economy by providing employment to a large number of unskilled and semi-skilled people. They are contributing significantly to output, employment and export etc. in the economy.
Earlier Indian MSMEs was sidelined from the rest of global village but after the introduction of MSMED Act by the Government, Indian businesses have become more competitive. To avail benefits under the MSMED Act, MSME registration is required. There are many benefits of MSME registration, some of them are listed below:
• Benefits from Banking Sector: All the banks and other financial institutions recognized MSMEs and has created special schemes for them in order to commercialize in a better manner. This usually includes priority sector lending, which means that the likelihood of your business being sanctioned a loan is high and lower bank interest rates. There may also be preferential treatment in case of delay in repayment.
• Tax Benefits: Depending on the nature of business, MSMEs get many tax benefits like exemption from excise duty as well as exemption from certain direct taxes in the initial years of its business.
• Benefits from State Governments: MSMEs registered under MSMED Act also get benefit on certain taxes levied by state government like sales tax and other subsidies.
• Benefits from Central Government: MSMEs also get benefits from certain schemes launched by Central Government especially for MSMEs registered under MSMED Act.
Registering a MSME is not a cumbersome process. Documentation is comparatively less as compared to any other entity formation. One requires the following documents to initiate for MSME:
Proof of Establishment (Sale Deed or Rent Agreement)
Bank Statement or Cancelled Cheque
Aadhar Card and Pan Card of the Authorized Person
Provisional MSME Registration-
Provisional Registration granted to a unit at its Pre- Investment period and to get various benefits like:
To get facilities for accommodation, land, other approvals etc.
To get various necessary NOCs and clearances from regulatory bodies.
Permanent MSME Registration-
Permanent Registration Granted to a existing and functioning industrial unit and to get various benefits like:
To get tax exemption
Price and purchase preference for goods produced.
MSMED act has prescribed the following slab to determine the status of an enterprise:
MSME enterprises are the backbone of any economy and after the introduction of MSMED Act; these enterprises have got a place in global market. There are various items which fall under Micro and Small Enterprises (MSEs) like pickles and chutneys, bread, mustard oil, ground nut oil, exercise books and registers, wooden furniture and fixtures, candles, laundry soap, safety matches, fireworks, agarbattis, glass bangles, steel Almirahs and stainless steel and aluminum utensils. The above items are reserved specially for MSMEs but these items can also be manufacture by Medium/Large units provided they need to export a minimum of 50 percent of the new or additional annual production of the MSE reserved items within a maximum period of three years from the date of commencement of commercial production of such reserved items.
MSME sector now has greater access to credit as banks are required to compulsorily ensure that specified percentage of their lending is made to these enterprises. Out of the total advances to small enterprise sector, 60% is reserved specifically for micro enterprises and the balance 40% for the small enterprises. Lending to Micro and Small enterprises is given more priority than lending to medium enterprises.
Therefore from the above, it is concluded that MSMEs plays an important role in the economic growth. In the future, we may see many of the MSMEs grow and challenge the larger industries in terms of growth as well as manufacturing excellence. This growth process of MSMEs would allow them to enter into large scale industries and would also allow new entrepreneurs to enter into MSMEs sector. Hence, we can say that MSMED Act introduced by the Government is a boom to economy and we could also expect some more supporting schemes from Central Government to make the economy grow faster and to make the MSMEs more competitive.