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Advantages of MSME Registration

Created on 21 Aug 2018

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Read by 3.2k people

Updated on 23 Oct 2019

Micro, small and medium enterprises (MSMEs) are often considered the backbone of Indian economy. MSME’s or SSI provides greater employment opportunity and ensures infrastructural development and industrial growth in the semi-urban and rural areas. Further, these have served well the socialist goals like equality of income and regional imbalances.

The employment provided by MSME’s is estimated to be four times greater than that of large enterprises. Around 36 million SME’s are generating 80 million employment opportunities, contributing 8% of the GDP, 45% of total manufacturing output and 40% of the total exports from the country.

The government in order to encourage these units, has provided many benefits which can be availed by registering under the MSMED Act. MSME fosters promotion and expansion of the business and functioning.

According to the Micro, Small & Medium Enterprises Development (MSMED) Act, 2006, it is divided into two categories according to the investment slab-

Provisional Registration: At pre-investment stage. Stages of Registration

  1. Permanent Registration: After provisional registration immediately prior the production facilities launch.

Note: Functional enterprises can directly apply for permanent registration.

Benefits for MSME/ SSI Registration

Banks and other financial institutions have special schemes for such enterprises. MSME have a higher probability of loan sanction which is known as the priority sector lending. Furthermore, these schemes entail lower bank interest rates and preferential treatment in case of delay in repayment. Other advantages include:

  • Credit Guarantee Scheme (CGTMSE)

The Ministry of Micro, Small and Medium Enterprises, Government of India and Small Industries Development Bank of India (SIDBI), introduced a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to launch the Credit Guarantee Fund Scheme for Micro and Small Enterprises. Under this scheme collateral- free loan is available for new and existing micro and small enterprises.

  • 50% subsidy on Patent registration

Enterprises with MSME registration are eligible a 50% subsidy for patent registration

  • 1% exemption on the interest rate on overdraft.

Further, bank credits are cheaper for enterprises with MSME registration due to low-interest rate which is around 1 to 15%. It also provides loan for minimum alternate tax (MAT) for up to 15 years instead of 10 years. MAT is the minimum amount of tax applicable to all companies except companies involved in infrastructure and power.

  • Concession in electricity bills and compensation of ISO certificate charges.
  • Industrial Promotion subsidy

Registered enterprises are eligible for Industrial Promotion Subsidy as may be prescribed by the government in this behalf.

  • Preferential treatment against delayed payment

In case of delayed payments from buyers, the Ministry of Micro, Small and Medium Enterprises provides protection against such delay and a right of interest through conciliation and arbitration. If the enterprise is registered, then the buyer of the goods and services is required to make payment on or before the agreed date. When there is no payment date on the agreement signed between the buyer and the micro/ small enterprise, then the buyer must pay within fifteen days of acceptance of goods and services. 

Note: A payment due to an MSME cannot exceed forty-five days from the acceptance day.

In addition to these benefits of MSME/ SSI registration, various state governments ensure subsidies on power, taxes, and entry to state-run industries. The central government also launch schemes periodically like the Credit Guarantee Scheme, to benefits the enterprises having MSME/ SSI registration.

To know more about MSME Registration click here

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Ayushi Upadhyay

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A Keen Learner. Tiny, brainy, and studious, this quiet one stays in her zone until she pops. And once she does, boy, are her comebacks snappy! There is no financial question that she can't answer through her magical blog-writing. 

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