Written by : DG Gupta

A financial professional, qualified Chartered Accountants and Company Secretary examinations and enriched with experience of all types of accounting, taxation and compliance of Manufacturing as well as Service Industries

Process of MSME Registration In India

DG Gupta
DG Gupta, CA, CS

Jun 30, 2021 03:31

A strong economy is truly the source of national strength, and with the MSME industry growing rapidly, it acts as the backbone of India's economy. MSME denotes Micro, Small, and Medium enterprises.

As per msme.gov.in, the MSME sector drives the economy by contributing 45% of overall industrial employment in India, 50 % of total exports in India, and 95 percentile (%) of the industrial units in the country. Furthermore, these firms produce around 6000 different types of industrial products and are commonly referred to as Small scale industries (SSI). Therefore, our economy accelerates forward as a result of the growth in those industries.
Through its national and international trade, the Indian MSMEs sector contributes about 29% towards the GDP.

MSMEs became functional on October 2, 2006, after the Government of India (GOI) brought into effect the Micro, Small, and Medium Enterprises Development (MSMED) Act. This government established this legislation to encourage, develop and accelerate the competitive environment of the Micro, Small and the Medium enterprises providing them with a platform to flourish.

What are Micro, Small, and Medium Enterprises (MSMEs)?

The MSMED Act 2006, enacted by the Government of India, categorizes firms in three categories based on their investment and yearly turnover.

The revised limits for defining the manufacturing and service sector enterprises into the three categories of Micro, Small, and Medium Entities is as follows:

  • A microenterprise is a venture where the invested amount in the machinery and plant (P&M) maximum upto Rs. 1 Crore and annual turnover is lower than Rs. 5 Crore.
  • A small enterprise refers to a business where the invested in machinery and plant (P&M) maximum upto Rs. 10 Crore and the annual turnover is less than Rs. 50 Crore.
  • A medium enterprise comprises a venture where the invested in P&M is lower than Rs. 50 crores and the annual turnover is less than Rs. 250 crores.

Low budgets were limiting growth, and industries were unable to grow up their operations. Therefore, the government decided to revise the MSME categorization while enabling them to profit from the MSME Act. Under the amended Bill, 2018, both yearly turnover and investment are considered for determining an MSME. The differences between manufacturing and service enterprises is also eliminated.

Benefits of MSME registration

MSMEs play an important role in the nation's socio-economic growth; further, MSME registration offers various advantages. Let's get started.

  • MSME registration makes it easier for new entrepreneurs, merchants, and company owners to obtain lower-interest bank loans. The rates range between 1 and 1.5 percent, which is significantly cheaper than the interest rate on normal loans.
  • MSME registration assists in the acquisition of government tenders.
  • It makes obtaining licenses, permissions, and registrations easier.
  • Tariffs are given access to the MSME registry.
  • MSMEs promote inclusion by creating job opportunities for society's marginalized communities to eliminate disparities.
  • It creates an environment that supports creativity among aspiring entrepreneurs, allowing them to construct something unique and give them a competitive feature in the market.
  • MSMEs provide advanced testing facilities as well as quality certification services.

The table categorizes the MSMEs' eligibility criteria.

Enterprise TypeAct of 2006Act of 2006Bill of 2018
ManufacturingServicesAll enterprise
Investment in Plant 7 machineryInvestment in EquipmentAnnual Turnover
Micro25 lakhs10 lakhs5 crore
Small25 lakhs to 5 crores10 lakhs to 2 crore5 crore to 75 crore
Medium5 crores to 10 crores2 crore to 5 core75 crore to 250 crore

The MSME Registration Procedure

Any firm that falls under the MSME category must be registered. The registration for MSME can be completed online at the government of India portal udyamregistration.gov.in.

Before we begin, let's go with the documents that one shall need to submit for registration. The relevant documents include:

Documents Required
  1. Aadhar card
  2. Rent agreement
  3. Property paper
  4. Copies of sales and purchase Bill
  5. Partnership Deed
  6. Memorandum of Association (MOA)
  7. Articles of Association (AOA)
  8. Copies of License and Bills of Machinery Purchased.
  9. Name, gender, PAN No, email id, and Mobile no of the applicant.
  10. PAN, location, and address of the company.
Let us begin with the MSME registration process.

The registration process are performed under three optional categories on the web portal -

  • For new startups or entrepreneurs who aren't yet registered as a MSME
  • For those already possessing registration as EM - II or UAM and
  • For those already possessing registration as EM - II or UAM through assisted filing
Registration using a PAN Card

Click the "For New startup or Business Entrepreneurs who are not yet Registered as MSME" action button, the registration page will ask for an Aadhar number. Enter the details and click the "Validate & Generate OTP action Button." After filling in the details, click the "Validate and Generate OTP Button."

An OTP will be generated. Enter the OTP on the Verification page of the PAN.

If the entrepreneur holds a PAN Card (as identity), the portal pulls the PAN information from government resources databases and prepares and fills in the page's entries automatically. First, however, the entrepreneur has to fill in the ITR information.

Once the PAN details entries are submitted, a notification stating "Udyam Registration has been already processed through this PAN number" appears, and the founder / owner now proceeds to click on the "Validate PAN" button.

After the PAN is verified, the Udyam Registration pop-up box appears, and the startup or businesses need to fill out the details of them and the enterprise. When you click the "Submit and Get Final OTP" button, the MSME is finally registered, and a notice of successful completion of registration with a reference number appears. A new Udyam Registration Certificate is assigned and issued following the registration verification that may take a few days.

Registration without having a PAN number

On the homepage of the relevant government portal, click the button "For New Business who are not yet Registered as MSME." enter your Aadhar number (#) and the full name of the founder / owner, then click the "Validate and Generate OTP” action button. After that, a new page will be generated to verify the PAN, triggers an OTP that needs to be entered. If the founder or owner of business doesn’t hold a PAN Card, select the "No" option under the title "Do you have a PAN?" before choosing the "Next" button.

The rest of the process is similar to the above one.

To avoid suspension of Udyam Registration, after receiving the PAN number and GSTIN account number must be updated on the portal before 01/04/2021.

Registration for the Entrepreneurs who already have EM - II or UAM:
Those who have already registered as EM - II or UAM must click one of the following relevant buttons

  • "For those who have registered as EM - II or UAM" or
  • "For those who have registered as EM - II or UAM through Assisted filing" on the Government portal.

Now, enter your Udyog Aadhar number and choose an OTP option. Click the "Validate and Generate OTP" button. Finally, submit the registration form to complete the process of Udyam registration.

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DG Gupta
DG Gupta, CA, CS

Jun 30, 2021 03:31

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