MSME REGISTRATION BENEFITES

SMALL SCALE INDUSTRIES (SSI) REGISTRATION

Small Scale and ancillary units (i.e. undertaking with investment in plant and machinery of less than Rs. 10 million) should seek registration with the Director of Industries of the concerned State Government.

Registering your SSI Unit

The main purpose of Registration is to maintain statistics and maintain a roll of such units for the purposes of providing incentives and support services. States have generally adopted the uniform registration procedures as per the guidelines. However, there may be some modifications done by States. It must be noted that small industries is basically a state subject. States use the same registration scheme for implementing their own policies. It is possible that some states may have a 'SIDO registration scheme' and a 'State registration scheme'.

Objectives of the Registration Scheme

They are summarised as follows:

1.        To enumerate and maintain a roll of small industries to which the package of incentives and support are targeted.

2.        To provide a certificate enabling the units to avail statutory benefits mainly in terms of protection.

3.        To serve the purpose of collection of statistics.

4.        To create nodal centres at the Centre, State and District levels to promote SSI.

Features of the Scheme

Features of the scheme are as follows:

1. DIC is the primary registering centre registration is voluntary and not compulsory.

2. Two types of registration is done in all States. First a provisional registration certificate is given. And after commencement of production, a permanent registration certificate is given.

3. PRC is normally valid for 2 years and permanent registration is given in perpetuity.

Provisional Registration Certificate (PRC)

o    This is given for the pre-operative period and enables the units to obtain the term loans and working capital from financial institutions/banks under priority sector lending.

o    Obtain facilities for accommodation, land, other approvals etc.

o    Obtain various necessary NOCs and clearances from regulatory bodies such as Pollution Control Board, Labour Regulations etc.

Permanent Registration Certificate

Enables the unit to get the following incentives/concessions:

1. Income-Tax exemption and Sales Tax exemption as per State Govt. Policy. 

2. Incentives and concessions in power tariff etc. 

3. Price and purchase preference for goods produced.

4. Availability of raw material depending on existing policy. 

5. Permanent registration of tiny units should be renewed after 5 years.

The registration under Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 is for facilitating the promotion and development and enhancing the competitiveness of Micro, Small and Medium enterprises.

What are Micro, Small and Medium enterprises?

What are Micro, Small and Medium enterprises?

The following slabs have been prescribed under the MSMED Act to determine the status of the Enterprise:

No.	Type of Enterprise	Manufacturing Enterprises (Investment in Plant and Machinery)	Service Industry (Investment in equipment)
1.	Micro	Does not exceed Rs. 25 Lakh	Does not exceed Rs. 10 Lakh
2.	Small	Exceeds Rs. 25 Lakh but does not  exceed Rs. 5 Crore	Exceeds Rs. 10 Lakh but  does not exceed Rs. 2 Crore
3.	Medium	Exceeds Rs. 5 Crore but does not  exceed Rs. 10 Crore	Exceeds Rs. 2 Crore but does  not exceed Rs. 5 Crore

Which are the classes of enterprises that may qualify for Registration?

All classes of enterprises, whether Proprietorship, Hindu undivided family, Association of persons, Co-operative society, Partnership firm, Company or Undertaking, by whatever name called can apply for the registration and get qualified for the benefits provided under the Act.

Whether the Registration is mandatory / compulsory ?

A Medium enterprise engaged in the manufacture or production of goods has to compulsorily register under the MSMED Act. For other Enterprises the registration is discretionary or optional.

Taking into consideration the benefits available under the Act, it is recommended that every enterprise shall opt for the registration.

ENEFITS OF SSI/MSME REGISTRATION

The registration scheme has no statutory basis. Units would normally get registered to avail some benefits, incentives or support given either by the Central or State Govt. Benefits available under the MSMED Act Registration of Micro, Small and Medium (MSM) Enterprises under MSMED Act is a very powerful medium to enjoy the regime of incentives offered by the Centre generally contains the following:

Micro and Small Enterprises:

1.        Easy finance availability from Banks, without collateral requirement

2.        Protection against delay in payment from Buyers and right of interest on delayed payment

3.        Preference in procuring Government tenders,

4.        Stamp duty and Octroi benefits,

5.        Concession in electricity bills

6.        Reservation policies to manufacturing / production sector enterprises

7.        Time-bound resolution of disputes with Buyers through conciliation and arbitration

8.        Reimbursement of ISO Certification Expenses

9.        Credit prescription (Priority sector lending), differential rates of interest etc.

10.    Excise Exemption Scheme

11.    Exemption under Direct Tax Laws.

12.    Stamp duty and Octroi benefits,

13.    Statutory support such as reservation and the Interest on Delayed Payments Act.

14.    Subsidy on ISO Certifications

15.    Subsidy on NSIC Performance and Credit ratings

16.    Participation in Govt Purchase registrations

17.    Regsiattion with NSIC

18.    Counter Guarantee from Govt. of India through CGSTI

19.    Waiver in Earnest Money (Security Deposit ) in Govt. tenders

20.    Stamp duty and Octroi benefits,

21.    15% weightage in price Preference.

22.    Reduction in rate of Interest from banks (Subject to ratings)

23.    Free of Cost Govt tenders

(It is to be noted that the Banking Laws, Excise Law and the Direct Taxes Law have incorporated the word SSI in their exemption notifications. Though in many cases they may define it differently. However, generally the registration certificate issued by the registering authority is seen as proof of being SSI).

States/UTs have their own package of facilities and incentives for small scale. They relate to development of industrial estates, tax subsidies, power tariff subsidies, capital investment subsidies and other support. Both the Centre and the State, whether under law or otherwise, target their incentives and support packages generally to units registered with them.

Medium Enterprises:

1.        Easy finance availability from Banks, without collateral requirement

2.        Preference in procuring Government tenders

3.        Reservation policies to manufacturing / production sector enterprises

4.        Time-bound resolution of disputes with Buyers through conciliation and arbitration

The Buyers have to ensure whether those suppliers of goods and services are under the purview of MSMED Act i.e. the Buyers have to confirm the registration of the suppliers under the MSMED Act.

The Buyer should ensure the payment before the end of credit period decided else the interest would be payable.

In case of disputes, application to Micro and Small Enterprises Facilitation Council (MSEFC) would trigger the conciliation and arbitration process. Once the application is done under MSEFC, there is no provision to withdraw the proceedings. Therefore, the Buyer should ensure the best ways to resolve the disputes, if any, instead approaching to MSEFC in the initial stages of dispute.

The Buyers need to ensure that the Buyer does not owe any outstanding amount including interest due to MSM Enterprises for more than 15 days. Otherwise, the Buyer needs to disclose this non-payment in the Annual Financials of the Buyer.

Payment of interest

The Act provides for the payment of compound interest at 3 times the Bank Rate by the Buyer in case of failure to make the payment with in maximum of 45 days from the date of receipt of goods or services.

Disclosure of delayed payment in audited accounts

Where any buyer is required to get his annual accounts audited under any law for the time being in force, such buyer shall furnish the following additional information in his annual statement of accounts, namely: -

- The principal amount and the interest due thereon (to be shown separately) remaining unpaid to any supplier (micro or small enterprise) as at the end of each accounting year.

- The amount of interest paid by the buyer along with the amounts of the payment made to the supplier beyond the appointed day during each accounting year. 

- The amount of interest due and payable for the period of delay in making payment (‘payment’ here means the payment which have been made but beyond the appointed day during the year and without adding the interest thereon specified under this Act for the period of delay).

Disallowance of interest under Income Tax Act, 1961

According to the Income Tax Act, 1961 the amount of interest payable or paid by any buyer, for delayed payments to Micro and Small Enterprises shall not be allowed as deduction for the purpose of computation income under the Income Tax Act, 1961. Printing of MSMED Registration/EM Number on the letter heads 

The Micro and Small Enterprises should mention/get printed on their letter heads, supply order sheets, invoices, bills and other relevant documents, the MSMED Registration/Entrepreneurs Memorandum (EM) Number allotted by a competent authority, so that there remains an identification of being a MSE supplier.

PRESENTED BY

DIWAKAR AGRAWAL

MOB-: 91-99911746549