The demand for revision in the definition of MSME has been pending for a long. The low threshold in MSME definition has created a fear among MSMEs of graduating out of the benefits and hence killing the urge to grow. The new MSME registration process and definition have been simplified, clearing away any previous fears businesses may have had.
In this article, we’ll discuss what MSMEs are, how they are defined in India, and how MSME registration is done in India.
What Is MSME?
MSME stands for “Micro, Small, and Medium Enterprises.”
These are businesses that are relatively small in size but play a crucial role in a country’s economy. MSMEs are the backbone of many economies around the world, providing employment, promoting entrepreneurship, and contributing to economic growth. Here’s a breakdown:
Micro Enterprises: These are the smallest of the small, often run by just one or a few people. They could be local shops, small online businesses, or even street food vendors. An example could be a neighborhood bakery operated by a family or a freelance graphic designer working from home.
Small Enterprises: Small businesses are a bit larger than micro-enterprises and may have a few employees. Examples include a local clothing boutique, a small software development company, or a family-owned restaurant in your town.
Medium Enterprises: These are bigger than small businesses, with more employees and higher revenue. A medium-sized enterprise might be a regional chain of stores, a mid-sized manufacturing company, or a technology firm with a broader market reach.
For instance, let’s take a look at a typical example.
Imagine a family-owned bakery (a micro-enterprise) that grows and expands into a small regional chain of bakeries (a small enterprise) and later evolves into a well-known regional or national pastry and confectionery brand with numerous outlets (a medium enterprise).
MSMEs are important because they create jobs, foster innovation, and contribute significantly to the economic health of a country. They’re often considered the engines of economic development and are supported through various government programs to help them grow and thrive.
MSME Registration & Definition In India
The investment limit has been revised upwards and additional criteria for turnover are also being introduced. Most importantly, the distinction between the manufacturing and service sectors is to be eliminated.
Following is the existing and revised Definition of MSMEs
Earlier MSME Classification | |||
Criteria: Investment in Plant & Machinery or Equipment | |||
Classification | Micro | Small | Medium |
Mfg. Enterprises | Investment<Rs. 25 lac | Investment<Rs. 5 cr. | Investment <Rs. 10 cr. |
Services Enterprise | Investment<Rs. 10 lac | Investment< Rs. 2 cr. | Investment<Rs. 5 cr. |
Revised MSME Classification |
|||
Composite Criteria: Investment & Annual Turnover | |||
Classification | Micro | Small | Medium |
Manufacturing & Services | Investment< Rs. 1 cr. and
Turnover < Rs.5 cr. |
Investment< Rs. 10 cr. and
Turnover < Rs.50 cr. |
Investment< Rs. 20 cr. and
Turnover < Rs.100 cr. |
To avail of the benefits of being an MSME, the business has to get registered. The registration process is an Aadhar-based process and can be done free of cost. Businesses can register as MSMEs from the Udyog Aadhar website.
Know more about Udyog Aadhar and the benefits of registration.
Also Read: Benefits of MSME Registration In India
MSME Registration: Documents Needed
The documents needed for MSME registration are pretty straightforward:
- Your Aadhaar card
- Your PAN card
The good news is that there are no charges for registering as an MSME, and you don’t have to provide any additional documents. The Udyam Registration Portal makes it easy for you because it automatically fetches your PAN and GST-related info from government databases.
This is possible because the portal is connected to the Income Tax and GSTIN systems.
Now, if your business doesn’t require GST registration, you’re all good. You don’t have to bother with it. But, if your business is one of those that must have a GST registration according to the GST law, then you’ll need to enter your GSTIN when you’re getting your MSME Registration or Udyam Registration.
It’s a simple step for those businesses that are required to have it.
MSME Registration: Step-by-Step Process
To get your Udyam Registration online, here’s a simple guide to follow on the Udyam registration portal:
Step 1: Start by going to the Udyam registration portal.
Step 2: Once you’re on the homepage, click on the option that says ‘For new entrepreneurs who haven’t registered as MSMEs yet or those with EM-II.’
Step 3: You’ll need to enter your ‘Aadhaar Number’ and your ‘Name’ as the entrepreneur. After that, hit the ‘Validate & Generate OTP’ button.
Step 4: An OTP (One-Time Password) will be sent to your mobile number that’s linked to your Aadhaar card. Put in the OTP and click ‘Validate.’
Step 5: Once your Aadhaar is confirmed, you’ll be directed to the PAN verification page. Here, you should enter your ‘Type of Organization,’ ‘PAN’ number, and click ‘Validate.’ You’ll also need to mention whether you filed your previous year’s ITR and if you have a GSTIN.
Step 6: The Udyam registration application form will pop up. Here, you’ll need to provide all the necessary information. This includes your name, mobile number, enterprise name, where your plant/unit is located, your enterprise’s address, enterprise status, bank details, your unit’s activity, NIC code, and the number of people you employ.
Step 7: You’ll also have to provide details about your investment in plant and machinery and your turnover. Make sure to select the declaration. After that, click ‘Submit’ and get your final OTP.
Step 8: Enter the final OTP you receive and submit the form. Your Udyam e-registration certificate will be sent to your email.
By following these steps, MSMEs can easily complete the Udyam Registration process and gain access to the benefits and support provided to registered businesses in the MSME category.
Conclusion
There are innumerable benefits to MSME registration in India. The government has finally defined MSMEs clearly and has simplified the process of registering for them.
Now that the entire process is online, it is easier than ever to start up and let the money flow.
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Also Read:
Benefits of MSME Registration In India
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