The MSME sector makes up for more than 90% of enterprises in the country. MSME stands for Micro, Small, and Medium Enterprises. Essentially, they are businesses run by individuals or families on a smaller scale. These businesses contribute to almost 40% of the country’s exports and 30% of India’s GDP.
These MSMEs create new employment opportunities in their geo-regions to rejuvenate the local economy. All over the country, the figure for employment through MSMEs is around 110 million people. For the many benefits that MSMEs do, the Indian government has taken measures to ensure that they thrive and grow.
They have introduced several schemes that can aid these businesses financially. These schemes can be accessed by registering with the government as a MSME. The registration must be done with the Ministry of MSME. However, these schemes are not the only thing that can be beneficial about going through MSME Registration. Let’s first look at how these businesses are categorized:
MSME Classification in India
According to the Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006, MSME businesses are classified into three types. The classification is based on the investment made into the business and its annual turnover. These types are:
A business can be categorized as ‘micro’ if the investment into equipment, plant, machinery, etc., is less than Rs. 1 cr. Moreover, the annual turnover of the business should be less than Rs. 5 cr.
A business can be considered under the small category if the investment into equipment, plant, machinery, etc., is less than Rs. 10 cr. Moreover, the annual turnover of the business should be less than Rs—50 cr.
A business can be considered under the small category if the investment into equipment, plant, machinery, etc., is less than Rs. 50 cr. Moreover, the annual turnover of the business should be less than Rs—250 cr.
Benefits of MSME registration
Registering with the government as an MSME means that you can access numerous initiatives that get you loans for funding your business. Moreover, many of these schemes allow business owners to get loans with collateral. This initiative is taken by the Government of India, Small Industries Bank of India, and the Ministry of Micro, Small, and Medium Enterprises. The agency that oversees these schemes is The Credit Guarantee Trust Fund Scheme. This is the best benefit that a business can have by registering as an MSME.
Patent registration subsidy
If your business is registered under the MSME Act, you can get a large subsidy of 50% for registering patents on your products or processes. This subsidy is accessible by applying to the right ministry. Moreover, MSME registration allows you to get a subsidy for an industrial promotion suggested by the government.
Overdraft facility and interest rate exemption
Spending money is often very unplanned if you own a small business. Sometimes you do not have to spend much while other times you may have to spend more. Hence, if you are registered as an MSME under the Act, you can benefit from an interest rate exemption of 1% on a bank overdraft facility. This benefit is part of the Credit Guarantee Trust Fund Scheme. However, the exact terms and figures can differ from bank to bank.
Protection against delayed payments
There can sometimes be a great imbalance between how you expect your finances to be and how they actually end up being. This can especially be tough on smaller-scale businesses. Understanding the issues, the Government offers assistance through an extra layer of protection if you end up being late on business payments.