Every nation’s economic growth depends upon the development of its manufacturing and service sectors. In developing countries like India, these sectors include many small enterprises that are still in the growing phase. Thus the Government makes sure these industries receive all kinds of benefits favorable for their growth.
Starting from MSME registration to providing several incentives for better performance, the Central and State Governments leave no stone unturned to help the MSMEs flourish. They cover integral part of the manufacturing and service sectors in India. These Sectors provide employment to more than 120 million people and contribute to the GDP more than any other Sector.
If we speak of the manufacturing sector, the GDP contribution is around 6.11% whereas, it’s 24.63% of the service sector. With an export share of 45% and a growth rate of 10%, the MSMEs are rightly known as the “Engine of Economic Growth” in India.
The Small and medium Industries have been strong even in the times of economic crises and are the reason behind the empowerment of the economically weaker sections of the society.
Since the Small and medium scale industries are so significant, the Government has a plethora of benefits for them once they’re registered under the MSMED Act. They are termed as the MSME Registration Benefits. It is not mandatory for an industry to register, but in order to get the most out of these benefits, the registration is essential.
The manufacturing sector industries are defined in the following way:
Micro Enterprise -with an investment less than or equal to ₹25 lakhs in plant and machinery.
Small Enterprise –with an investment in plant and machinery of more than 25 lakhs but less than or equal to ₹5 crore.
Medium Enterprise –more than ₹5 crores but less than or equal to ₹10 crores investment in plant and machinery.
The micro, small and medium enterprises need to be registered under MSMED Act to avail the benefits of MSME. The Government has also provided Udyog Aadhar facility to ease the MSME Registration process.
Udyog Aadhar is a system to let people register their business enterprises under the MSMED Act. An MSME Registration certificate and a unique number which helps them in availing the MSME Registration Benefits are provided.Earlier, MSME registration was a complex and time-taking process that involved a lot of paperwork. Now, with Udyog Aadhar system, things have become much easier.
The Central and State Governments make sure the MSME grow and develop gradually, and their interests are always taken care of. The benefits can be enjoyed by the businesses having MSME registration certificate.
Benefits for Registration under MSMED:
- Financial support from banks facilitated by Government
It becomes easy to raise funds for the financial needs of the Micro, Small and Medium Enterprises once they’re registered with MSMED. The Government helps in providing subsidized loans from banks with lower interest rates. It is one of the most significant MSME registration benefit.
- Schemes by the Central Government for development of Small and medium Industries
With schemes like Credit Guarantee Fund Trust for Micro and Small Enterprises, collateral-free loans are provided to the MSMEs. Further, SIDBI provides financial aid to the MSMEs through Pradhan Mantri MUDRA Yojana.
- Tax Benefits
While taking into consideration, the kind of industry is, one can avail benefit for excise duty exemption. Moreover, you may also enjoy direct tax exemption benefits, if you are in the initial growth phase of your business.
- Reservation of Products manfactured by MSMEs only
As the Small and medium Scale Industries operate on a smaller scale, the Government makes sure that they do not end due to the prevailing competition in the market. Thus it has reserves certain products that must be produced by the Micro, Small and Medium Enterprises only. Moreover, the Government stores are bound to purchase certain products like wooden furniture, jewelry, pickles, etc from these industries only.
- Easy recovery of Money
The Government of India helps the MSMEs against buyers that do not pay on time thus eliminating Bad Debts. During the supply of goods and services, if a date is mentioned in the agreement between the MSMEs and the buyers, the payment is supposed to be made on or before it, and if no due date has been mentioned, the buyer has to make the payment within 15 days after the goods and services have been accepted. If no payment is made in excess of forty-five days after the goods and services have been supplied. In case the buyers do not comply with these provisions, they have to pay the penalty due to the delay in payment equals Three Times the current bank interest rate as set by the RBI.
The MSMED make sure the needs of small entrepreneurs are not compromised.
- Reduced Fees for Trademark Registration
The MSME certificate can help you with trademark registration as well. It gives you an opportunity of having a 50% subsidy in the payment of fees only while you are applying for registering a trademark or a patent.
- Foreign Business Expo
The Government of India helps the Micro, Small and Medium Enterprises in participating in foreign expo’s by providing financial assistance. Thus such MSME benefits motivate people to become entrepreneurs and to run their businesses successfully.
- An exemption in interest on Overdraft
If the industry is registered under the MSMED Act, you can enjoy a 1% exemption on the interest rate on overdraft facilities.
- Facilities to upgrade Technology used in the industry
The Small and medium Scale Industry runs low on financial capital as compared to the other industries. This is the reason behind their use of obsolete machinery for the production of goods and services. The Government of India want to makes sure that the small-scale industries are provided with sufficient funds under the Capital Aid for Technological Upgradation Scheme to upgrade the machinery they use.
- Subsidies and Government Schemes to promote your industry
The various Government of States have launched a number of schemes to help in promotion of business. Schemes like Pradhan Mantri Employment Generation Programme and Skill Development Programme comes a long way in developing the enterprises. The Government also provides subsidies to help raise the revenues.
- Remuneration for ISO certification expenses
The industries with a MSME certificate are liable to receive compensation, when they incur any expenses on ISO certification process.
- Reduction in Electricity Bills
If the business enterprise is registered under the MSMED Act, one may enjoy a huge concession in electricity bill. This way, one can reduce the amount of fixed cost you incur in managing your business. The MSME registration benefits gives way to development and growth of industries.
Thus, one can see how MSME registration certificate can help in establishing a business. With a simplified Udyog Aadhar process, one will be able to multitude the advantages and can become a successful entrepreneur. Thereby, make a valuable contribution to the growth of economy.
- Women Entrepreneurship
Women as entrepreneurs are minimal figure in our Nation, with only 14% of all entrepreneurs are women. Thus to promote and cater to the potential of women as entrepreneurs, Government has launched many schemes to provide benefits and skill-training to young women, who desire to take up entrepreneurship and MSMEs as their carrier option. MSME schemes for entrepreneurship are unmatched in providing help that is specifically available to women.
The scheme takes good care of women, who may not have adequate required educational background and experience for handling entrepreneurship and hence provide them training for the same. A prize named as ‘Outstanding Women Entrepreneur’ is being awarded every year. The prize is given to recognize the achievements and innovations made by women entrepreneurs.
There are many other schemes too, that exist to serve the purpose for the same. One of such scheme is Income Generating Scheme, under this scheme training and alongside income generation through entrepreneurial activities. This scheme also aims to make women economically and financially well founded and independent by financing their ideas and their MSMEs. A Government MSME loan is also provided to bright women entrepreneurs at a very low interest rates and with ease of documentation.
Various Schemes under MSMED Act-
# Grievance Monitoring System:
Benefits under this scheme are in terms of getting the complaints of the enterprises regarding recovery of bad debt.further with legal action to recover their debts.
# Financial help from Banks
Rate of Interests are lower for the duly registered companies or enterprises as compared to other. Public sector banks have categorize their MSME in two wings as general banking branches and as specialized MSME branches having 60% or more of their advances as loans to MSME sectors. This is done to provide a better service network to the sector as a whole.
Even as per Reserve Bank of India Circular on lending being given to the MSME sector dated July 1, 2010, a composite loan limit Scheme under which a loan of Rs.1crore can be availed.
# Udyog Aadhaar memorandum:
Enterprise can link their 12 digit Aadhaar number. As the Aadhaar card is a mandatory requirement for registration. The benefit of registering under this scheme is the ease in availing credits, loans, and other subsidies from the government. Registration can be done either online or offline.
# Credit Linked Capital Subsidy Scheme:
Under this scheme, new technologies are provided to the enterprises to replace their old and obsolete technology. A capital subsidy is also given to the business to upgrade and have better means to do their business. The small, micro and medium enterprises can directly approach the banks for these subsidies and loans for up-gradation.
With a view to provide easy access to credits, loans and financial assistance to Micro Small and Medium Enterprises, the government of India has initiated the MSME Support and Outreach Programme (SOP). Under this scheme, the Government of India will provide a principal approval to all MSMEs who are having MSME registration and GST Registration alongside, for easy loans up to ₹ 5 crore within 59 minutes.
Those MSMEs having a GST registration will be granted 2% subsidy in their interest rates. This will definitely boost tax compliance among the MSMEs and will enhance their ease of doing business.
Further to add, those exporters who are having a unique Import Export Code (IEC) along with GST registration will be given an additional rebate in their interest rate from 3% to 5% on loans availed by them in their pre-shipment and post-shipment periods.
# Zero Defect Zero Effect:
In this model, goods that are manufactured for export purpose have to adhere to a certain standards, so that they are not rejected or sent back to India against any quality Issue. To achieve this goal, the government has launched this scheme of Zero defect Zero effect. In this, if such goods are exported, they are eligible for some rebates and concessions.
# Promotion of Novel Ideas:
This scheme helps the financial assistance falling in 75% to 85% of the project cost, up to a maximum of 6.25Lakh Rupees per idea is provided which is limited to 10 ideas for the Business Incubators or the host institute. The Business Incubators are also eligible to avail Rs. 3.78 lakh for their infrastructure and training expenses for incubating 10 ideas that is Rs. 37,800 per idea. Any individual or Micro and Small Industries that has an innovative business idea at final commercialization stage may approach the Business Incubators approved under the scheme. Various institutions like an Engineering Colleges or a Management Institutions or a Research labs, etc. having an in-house incubation facility and faculty for providing handholding support to new idea may apply in the prescribed application form.
Current Schemes Going under MSME are as following:
- Single Point Registration Scheme (SPRS): Under this scheme there is Exemption from payment of Earnest Money Deposit (EMD) and fund less issue of tenders.
- Credit Guarantee Scheme (CGS): This Scheme provides guarantee of credit assistance from CGTMSE fund set up by SIDBI for entities engaged in manufacturing and service activities.
- Coir Udyami Yojana: Under this scheme the supporting Coir Units with credit up to 25% of project cost up to a maximum of Rs 10 lakh and financing working capital with up to 25% of project cost.
- Market Development Assistance: Under this scheme the aiding startups get access to international markets and ease exports of their goods and services through government agencies.
- Credit Linked Capital Subsidy for Technology Upgradation: This Scheme helps supporting startups providing access to technology providing upfront capital.
- Raw Material Assistance (by NSIC): This scheme Provides easy access to finance for processing raw material for production and help startups focuses more on their concerned services.
- Infrastructure Development Scheme: This scheme provides access to software parks, lease spaces, finance and assistance in holding exhibitions in metro cities and capturing the market.
- Revamped Scheme of Fund for Regeneration of Traditional Industries (SFURTI): This scheme helps startups inclusive of traditional industries and artisans to organize and get long term sustainability, providing easy access to tools & equipment, strengthen the cluster with market intelligence, improved technology, etc.