India’s Gross Domestic Product (GDP) benefits significantly from the substantial contributions of micro, small, and medium-sized enterprises (MSMEs). These enterprises employ over 110 million people. However, MSMEs encounter challenges and obstacles in their journey of growth and expansion. To address and support these MSMEs, the Indian government initiated a significant step on May 13, 2020, by introducing a new classification metric. Under this classification, all MSMEs in India are referred to as ‘Udyam’ and must undergo the ‘Udyam Registration‘ process. This decision received approval from the Union Cabinet, making Udyam registration mandatory for all MSMEs starting from July 1, 2020.
MSME industries are the backbone of the economy. They are also known as Small Scale Industries (SSIs). The government of India provides an MSME registration to the industries classified by the government as Micro, Small and Medium Enterprises (MSME) in India. The MSME registration helps MSMEs to obtain various benefits provided by the government for their establishment and growth.
What is MSME?
MSME stands for Micro, Small, and Medium Enterprises. It is a classification introduced by the Government of India following the Micro, Small, and Medium Enterprises Development (MSMED) Act of 2006. These enterprises primarily produce, manufacture, process, or preserve goods and commodities. The MSME sector is crucial to India’s economy, contributing significantly to employment generation and overall economic growth.
What is MSME Classification?
when the government introduced the MSME registration in 2006, the MSME classification was based on the investment criteria in plant and machinery or equipment. The government revised the MSME classification by inserting annual investment and annual criteria. Also, the distinction between the manufacturing and the services sectors under the MSME definition was removed.
The following is the current revised MSME classification, where the investment and annual turnover are to be considered for deciding if an entity is considered as an MSME:
| Revised MSME Classification | |||
|---|---|---|---|
| Criteria | Micro | Small | Medium* |
| Investment & Annual Turnover | < Rs.1 crore & < Rs.5 crore | < Rs.10 crore & < Rs.50 crore | < Rs.50 crore & < Rs.250 crore |
What is Udyam Registration/MSME Registration?
Udyam Registration is an electronic certificate issued by the Indian government to Micro, Small, and Medium-sized Enterprises (MSMEs) operating in the country. It has replaced the earlier Udyog Aadhaar Memorandum (UAM) registration process. While Udyam registration is not mandatory, it offers significant benefits to MSMEs, making it advantageous for them to apply for this registration.
- By obtaining Udyam registration, MSMEs become eligible for various government benefits and incentives exclusively available to enterprises under the MSME category.
- The registration process for Udyam is entirely based on self-declaration, eliminating the need to upload any documents, papers, certificates, or proofs.
Udyam Registration Number- Upon successful registration, the enterprise, referred to as “Udyam” in the Udyam Registration portal, will be allotted a unique and permanent identity number known as the “Udyam Registration Number.”
Udyam Registration Certificate- After completing the registration process, an e-certificate called the “Udyam Registration Certificate” will be issued to the enterprise. This certificate serves as an official confirmation of their eligibility for government benefits and support.
MSME Registration Eligibility
All manufacturing, service industries, wholesale, and retail trade that fulfil the revised MSME classification criteria of annual turnover and investment can apply for MSME registration. Thus, the MSME registration eligibility depends on an entity’s annual turnover and investment. The following entities are eligible for MSME registration:
- Individuals, startups, business owners, and entrepreneurs
- Private and public limited companies
- Sole proprietorship
- Partnership firm
- Limited Liability Partnerships (LLPs)
- Self Help Groups (SHGs)
- Co-operative societies
- Trusts
Benefits of Udyam Registration
- Access to Government Schemes: Udyam registration is a prerequisite for MSMEs to avail themselves of various government schemes and programs the Ministry of MSME offers. These schemes include the Credit Linked Capital Subsidy, Credit Guarantee, Public Procurement Policy, and more. Registering under Udyam ensures that MSMEs can tap into these initiatives and receive essential financial support and incentives.
- Seamless Integration: The Udyam portal seamlessly integrates with other critical government systems, such as the income tax portal, GST identification systems, and government e-marketplace. This integration streamlines various administrative processes, making it easier for MSMEs to manage their financial and tax-related affairs efficiently.
- Priority Sector Lending: With Udyam registration, MSMEs become eligible for priority sector lending from banks. This special lending consideration enables them to access credit facilities more efficiently and at favorable terms, further supporting their business expansion and investment plans.
- Extended MAT Credit: MSMEs with Udyam registration are entitled to carry forward Minimum Alternate Tax (MAT) credit for 15 years instead of the previous ten years. This extension provides them additional tax benefits, facilitating better financial planning and stability for their long-term growth.
- Lower Interest Rates: One of the most significant advantages of Udyam registration is the ability to secure bank loans at lower interest rates. Typically, MSMEs with Udyam registration can avail of loans as low as 1% to 1.5%, reducing their financial burden and enhancing their capacity to invest in business expansion and innovation.
Documents Required for MSME Registration
The MSME registration documents are as follows:
- Aadhaar card
- PAN card
PAN and GST-linked details on investment and turnover of enterprises will be taken automatically by the Udyam Registration Portal from the Government databases since the portal is integrated with Income Tax and GSTIN systems.
GST registration is not compulsory for enterprises that do not require a GSTregistration. However, enterprises that mandatorily need to obtain GST registration under the GST law, must enter their GSTIN for obtaining the MSME Registration or Udyam Registration.
How to Get Udyam Registration Online?
- Step 1: Visit the Udyam registration portal.
- Step 2: On the homepage, click the option ‘For new entrepreneurs who are not registered yet as MSME or those with EM-II.’
- Step 3: Enter the ‘Aadhaar Number’ and the ‘Name of Entrepreneur,’ then click the ‘Validate & Generate OTP’ button.
- Step 4: An OTP will be sent to the mobile number linked with the Aadhaar card. Enter the OTP and click on the ‘Validate’ button.
- Step 5: Once the Aadhaar is validated, proceed to the PAN verification page. Enter the ‘Type of Organisation’ ‘PAN’ number, and click the ‘Validate’ button. Also, indicate whether you have filed the previous year’s ITR and if you have a GSTIN.
- Step 6: The Udyam registration application form will appear. Fill in all required details, including the name of the entrepreneur, mobile number, name of the enterprise, location of the plant/unit, address of the enterprise, status of enterprise, bank details, activity of the unit, NIC code, and number of persons employed.
- Step 7: Provide the following Details. Click the Submit button and Get the Final OTP.
- Investment in plant and machinery details and turnover details.
- Select the declaration.
- Step 8: Enter the final OTP received and submit the form. You will receive the Udyam e-registration certificate in your email.
FAQs
Q: Can I get MSME registration for a partnership firm?
Yes. A partnership firm that fulfils the MSME classification’s investment and turnover criteria can apply for MSME registration.
Q: What is the validity of the MSME Registration Certificate/Udyam Registration certificate?
There is no expiry of the Udyam/MSME Registration Certificate. As long as the entity is ethical and financially healthy, there will be no expiry of the certificate.
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