8 key benefits of obtaining MSME registration

20 March 2023

While MSMEs are considered as growth engines of an economy and have become its major pillar of foundation, they still face several operational & financial challenges hindering their growth prospects. Therefore they need to be provided with an impetus not just to sustain but also to keep the spirit of entrepreneurship alive.

Here are some of the key benefits of obtaining MSME registration in India-

  1. Overdraft interest rate benefit

During unfavorable market conditions, MSME registered entities can take advantage of a 1% discount on bank overdraft interest rates, although the rate may vary depending on the bank.

  1. Patent registration subsidy

In India, MSMEs can receive a subsidy for patent registration. This subsidy aims to promote innovation and intellectual property rights among MSMEs by reducing the cost of patent registration. The quantum of subsidy for patent registration in India for MSMEs is up to 50% of the total cost incurred in filing a patent application. The maximum amount of subsidy that can be availed by an MSME is limited to Rs. 15 lakhs. However, it's worth noting that the exact amount of subsidy may vary depending on the specific scheme and government policies in place at the time of application.

  1. Protection from delayed payments

Delayed payments can be a significant challenge for MSMEs as it can impact their cash flow and hinder their growth. To protect MSMEs from delayed payments, the MSME Development Act mandates payment of dues within 45 days of the acceptance of goods or services. Failure to do so can attract penal interest at 3 times the bank rate notified by RBI, thus encouraging timely payments and providing liquidity to MSME businesses

  1. Collateral free bank loans

Banks and financial institutions offer collateral-free loans up to Rs. 2 crores to MSMEs that are registered. This makes it easier for MSMEs to obtain loans and improve their cash flow.

  1. Credit guarantee scheme

MSMEs that are registered are eligible for the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme. Under this scheme, the government guarantees up to 75% of the loan amount, which reduces the risk for lenders and makes it easier for MSMEs to obtain loans.

  1. Industrial Promotion subsidy

The government of India offers the Industrial Promotion Subsidy (IPS) scheme to support MSMEs in their efforts to modernize, upgrade technology, and expand their existing business operations. MSMEs can receive a subsidy ranging from 5% to 15% of the capital investment made towards eligible plant and machinery, subject to a maximum of Rs. 15 lakhs. The percentage of subsidy and the maximum limit may differ depending on the industry and location of the MSME.

It is important to note that MSMEs must have a valid Udyog Aadhaar Memorandum (UAM) to be eligible for the scheme, and the subsidy is provided only for a one-time investment. Furthermore, the scheme includes certain terms and conditions that MSMEs must follow, such as maintaining proper accounts, undergoing regular inspections, and submitting periodic progress reports.

  1. Concessions on electricity bills

MSME enterprises can apply for concessions on electricity bills by applying to the department of electricity along with their MSME registration certificate. This especially aids in boosting production activities in the manufacturing sector.

  1. Reimbursement of ISO Certification Charges

MSMEs can avail reimbursement of ISO certification charges as part of the government's efforts to promote quality and standardization in the industry. Under this scheme, MSMEs can be reimbursed up to 75% of the total cost of obtaining ISO certification, subject to a maximum of Rs. 75,000. However, it's important to note that the reimbursement is available only for the first-time certification and the MSME must have a valid Udyog Aadhaar Memorandum (UAM) to be eligible for the scheme.

The contents of this article are for information purposes only and do not constitute advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer to relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc. before acting on the basis of the above write up. By the use of the said information, you agree that the Author / Treelife is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof.

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