Gone are the days when compliance cost was way too high and there were a number of taxes to be paid by the company. Now, the scenario is exactly the opposite. Systems of multiple taxes are scrapped, compliance costs are coming down, and on top of it, the government is providing impetus to the MSME sector by making loans available at a lesser interest rate. To avail of all these benefits you have to register and get an MSME certificate (Udyam).
In this blog, we will know the definition of MSME and the benefits of getting a registration certificate.
Updated MSME Definition
On 1st June 2020, the Central Government of India led by Prime Minister Narendra Modi revised the MSME definition as follows:
|Type of enterprise||Investment||Turnover|
|Micro||Rs 1 crore||Rs 5 crore|
|Small||Rs 10 crore||Rs 50 crore|
|Medium||Rs 50 crore||Rs 250 crore|
The decision to update the definition was taken as a part of the Atmanirbhar Bharat Abhiyaan relief package. After this update in definition, a larger number of medium-sized industries as a consequence.
Benefits Of Having an MSME Registration Certificate
Following are the benefits of having a Udyam certificate that you should know:
Collateral Free Loan
The Government of India has instructed nationalized banks to provide loans to all micro, small, and medium (MSME) industries. Old as well as new industries can claim the benefits of the same. To implement the scheme, a trust named The Credit Guarantee Trust Fund Scheme, the Small Industries Development Bank of India (SIDBI), and the Ministry of MSME were established.
Protection Against Late Payment
There is always a risk of delayed payment in the business, especially in MSMEs. Due to the same, the business cycle gets disturbed. In cases where payment of MSME gets delayed, the Supreme Court of India has given the authority to levy interest on their clients if they fail to make the payment on or before the agreed date or within 15 days from the successful delivery of the goods or services.
If the payment delays the payment more than 45 days from the delivery of goods or services then MSMEs have the right to levy 3X interest rates notified by the Reserve Bank of India and it is calculated as compound interest.
Provision Of Subsidy On Patent Registration
As per the laws laid out by the Ministry of MSME, they are entitled to get a 50% subsidy on their patent registration fees. This regulation intends to encourage businesses to register their innovation so that no one can copy them and they can take full advantage of their out-of-the-box idea. This subsidy can be availed by registering applications with all the relevant documents to the corresponding ministry.
Discount On Electricity Bills
All companies holding MSME registration certificates are entitled to receive concessions on their electricity bill. With this step, the government wants to boost production within the country so that owners do not have to worry about overhead costs and can take on more orders. To avail yourself of this concession, you can file an application with your concerned electricity board along with an MSME registration certificate.
Aid in Marketing & Promotion
The Indian government organizes trade-related events, craft fairs, exhibitions, industrial expos, and exchange programs. In these programs, foreign delegates are invited so that industries can have an opportunity to export the products. Apart from this, events like these open new doorways for networking and collaborations among industries which further strengthen the production capability of our country.
On top of it, the government provides technical assistance to MSMEs involved in exporting goods or services.
Access To International Business Events
The Government of India offers access to international trade or business events, international seminars, meetings, and exhibitions to MSME industries where they can demonstrate their skills and gain exposure.
Relaxations In Interest Rates
Bank loans are offered at lower interest rates to MSMEs as compared to other businesses. Not only that, the bank prioritizes lending loans to MSME industries. Thus, this is an advantage for the sector.
MSME Sectors In Priority For Lending Loans
As notified by RBI, the following are the sectors of MSME that are given priority in lending loans:
- Micro, Small, and Medium Enterprises
- Export Credit
- Social Infrastructure
- Renewable energy
Features Of Udyam Certificate (MSME Certificate)
Following are the features of the MSME certificate that you should know:
- The registration process is completely paperless
- No need to furnish any documents
- The Udyam portal is directly linked to the Income Tax and GST portal. Details on turnover and investment will be fetched automatically.
- Here, experts are not considered a part of the turnover
- Misrepresenting the udyam certificate is liable to a penalty under section 27 of the MSME Act.
- After the successful completion of the registration process, a certificate will be generated with a dynamic QR code expressing the details of the company.
Latest Update: Amendment In Section 43B Of the Income Tax Act
The finance minister of India, Smt. Nirmala Sitharaman addressed the concern of delayed payments of MSME industries in her budget speech on 1st February 2023. She said “In order to promote timely payments to micro and small enterprises, it is proposed to include payments made to such enterprises within the ambit of section 43B of the Act. Thus, a deduction for such payments would be allowed only when actually paid. It will be allowed on an accrual basis only if the payment is within the time mandated under the Micro, Small, and Medium Enterprises Development Act.”
Now, if the buyer does not pay to the MSME (seller) the amount will be disallowed to consider an expense and will be liable to pay income tax on the same.
According to industry experts, this move is believed to be an ‘out-of-the-box’ solution to further grow the industry.
So this is everything you need to know about the benefits of getting your MSME registered. We hope that after reading this blog, you will register your business and take advantage of the government’s benefits. However, if you are facing difficulty in maintaining your books of accounts, then you should try Munim, India’s best online accounting software. It comes with more than 25 types of charts of accounts that will help you maintain every piece of financial information about your company.