In order to promote the growth of Micro, small, and Medium Enterprises (MSMEs), the government of India gives various concessions and extends financial assistance exclusively to the units or enterprises which qualify to be micro, small or medium enterprises.
It is one of the many sectors that have immensely impacted and hit during this pandemic situation. It not only contributes to our country’s GDP but also contributes massively by employing lakhs and lakhs of both skilled and unskilled labour, professionals etc. This article aims to give an overall understanding of the Micro Small and Medium Enterprises and the process and benefits of MSME registration under Udyog Aadhaar.
What is Meant by MSME?
Definitions of Micro, Small & Medium Enterprises
In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises are classified in two Classes:
1. Manufacturing Enterprises-The enterprises engaged in the manufacture or production of goods pertaining to any specified industry or employing plant and machinery in the process of value addition to the final product having a distinct name or character or use. The Manufacturing Enterprise is defined in terms of investment in Plant & Machinery.
2. Service Enterprises- The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment.
Why did we need a revision in the MSME definition?
During the time of lockdown, the entire supply chain beginning from Manufacturing of raw materials until selling of finished products to customers has been distorted and broken.
Labourers are losing their respective jobs, manufacturers are not able to sell what they are producing, wholesalers and retailers are not able to sell their finished goods or services to the customers since they don’t have sufficient disposable income left to spend.
In order to overcome the same, Government of India has announced numerous relief measures which are well summarised here
Essentially, the goal is to build a self-reliant India that is why the Economic Package is called Aatma Nirbhar Bharat Abhiyaan. Citing the pillars on which we seek to build Aatma Nirbhar Bharat Abhiyaan, Smt. Sitharaman said our focus would be on land, labour, liquidity and law.
Old v/s New Classification
A. Original Classification
(Based on investment in plant and machinery )
1. Micro enterprises – When an investment does not exceed Rs. 25 lakhs during the financial year.
2. Small enterprises – When an Investment of more than Rs. 25 lakhs but not exceeding Rs. 5 crores during the financial year.
3. Medium enterprises– When an Investment of more than Rs. 5 crores but does exceeding Rs. 10 crores during the financial year.
(Based on investment in equipment)
1. Micro enterprises – When Investment does not exceed Rs. 10 Lakhs during the financial year.
2. Small enterprises – When Investment is more than 10 Lakhs rupees but not exceeding Rs. 2 Crores during the financial year.
3. Medium enterprises – When Investment is more than Rs. 2 Crores but not exceeding Rs. 5 Crores during the financial year.
B. New and updated Classification
There is no classification of MSME in terms of Service or Manufacturing units as earlier:
1. Micro – Any enterprise having an investment up to Rs 1 crore and turnover under Rs 5 crore.
2. Small – Any enterprise having an investment up to Rs 10 crore and turnover up to Rs 50 crore.
3. Medium – Any enterprise having an investment up to Rs 50 crore and turnover under Rs 250 crore.
Is it mandatory to register MSMEs?
The Micro, small and medium enterprises development act 2006 makes it mandatory for Micro, Small, and Medium Enterprises to register themselves with the government and to obtain Udyog Aadhaar for availing benefits provided under the MSME Development Act.
The terminology like MSME, SSI or Udyog Aadhaar is one and the same thing. In other words, there is only one registration which micro, small, or medium enterprises have obtained and that is Udyog Aadhaar.
MSME is considered as the backbone of the Indian economy and is considered as the growth engine for the equitable and sustainable economic development of the country.
Under MSME all the kinds of enterprises either in manufacturing or service sectors can avail the benefit by getting Registered and registering themselves for Udyog Aadhaar.
Information and Documents required for MSME Registration
• Udyog Aadhaar is a free facility by government, and there is no fee charged by the government
• PAN in case of companies, LLP, or cooperative society, it is optional in all other cases
• Aadhaar Number and PAN of the applicant, OTP shall go to his mobile and email ID for confirmation
• Address Proof of Establishment, either in the form of a sale deed or valid rent agreement
• Bank Account Information (Bank Statement and Cancelled Cheque)
• NIC Code of the products and services in which the enterprises are dealing at the time of registration
• Copy of Industrial Licence
• Bills and Receipts of purchase of machinery
• Sale and Purchase bills
• In the case of Unregistered Partnership Firm
○ Partnership Deed
• In the case of Registered Partnership Firm
○ Registration Certificate
• In the case of Company
○ Memorandum of Association (MOA)
○ Article of Association (AOA)
○ Certificate of Incorporation
○ A copy of the resolution passed in the General Meeting of the company
○ A copy of the Board Resolution authorising a director to sign the MSME application
Step 1: Users can opt for Online or Offline Mode and For Registration Aadhaar No. is mandatory.
Step 2: The Online Form is required to be submitted using Udyog Aadhaar Registration.
For filing of the online registration form kindly visit
Step 3: Verification can be done with the help of E-Aadhaar OTP.
Step 4: Provisional Registration is used by MSMEs prior to commencement of Business and is valid for 5 years or 60 Months. Benefits of obtaining Provisional Registration involves.
a. Assists in Obtaining Bank Loans and
b. NOC from regulatory authorities
Step 5: After E-Verification of Aadhaar continue with the further process of submitting your personal details.
Step 6: After submission of the form OTP will be generated on the mobile phone linked with your Aadhaar.
Step 7: Download the Online Generated Udyog Aadhaar after final submission of the form filled in step 5 & 6.
Benefits of Registration as Udyog Aadhaar
• Every MSME whether in the manufacturing or service sector is entitled to collateral-free loans at a cheaper rate of interest in comparison to rates prevailing in the market.
• Such enterprises can avail 1% concession on overdraft facilities as per scheme but it differs from bank to bank.
• Easier, convenient and cheaper to obtain business licenses.
• ISO certification costs are also refundable from the government.
• 50% subsidy is given at times of any Patents Registration.
• Such enterprises are eligible for a subsidy for Industrial Promotion as suggested by the government.
• Concession in electricity bills is given to every enterprise registered as MSME by submitting an application along with the certificate of registration by MSME.
The Ministry of Micro, Small and Medium Enterprise helps enterprises by giving them the right to collect interest on the delayed payments. The settlement of such disputes must be done in minimum time through conciliation and arbitration.
In case, if any Micro Small and Medium Enterprises registered enterprise supplies any goods or services to a buyer then the buyer is required to make the payment on or before the agreed date of payment or within 15 days from the day they had accepted the goods and services from MSME or SCI registered business( if there is no mention of the date of payment).
If the buyer delays the payment for more than 45 days after accepting the products or services then the buyer has to pay the compound interest along with interests (monthly) on the amount that was agreed to be paid. The interest rate is three times the rate that is notified by the Reserve Bank of India.
Micro Small and Medium enterprises are not only the backbone in case of our country but it is considered as the key and major component in contributing and building an economically sound and viable Financial system of any country.
By providing such benefits and concessions to Micro Small and Medium Enterprises, it will definitely help in turning around the weak economic structure of our country and will contribute towards the goal to build a self-reliant India that is why the Economic Package is called Aatma Nirbhar Bharat Abhiyaan.