MSME – Definition and Benefits

The Micro, small and medium enterprises (MSME) sector is considered the backbone of the Indian economy that has contributed substantially to the economic development of the nation. It generates employment opportunities and works in the development of backward and rural areas.

Under MSME Development Act, 2006, the Government of India established The National Board for Micro, Small and Medium Enterprises (NBMSME) to examine the factors affecting promotion and development of MSME. This board also reviews the existing policies and suggests recommendations to the Government for the growth of the MSME sector.

Definition of MSME

MSME’s are classified as per their turnover and investments.

The new classifications as per the Aatma Nirbhar Bharat Abhiyan Scheme in 2020 is given in the table below:

Benefits of MSME Registration

In addition, due to the following features, MSMEs are considered a viable source of income for those looking to venture into the manufacturing industry.

• Bank Loans (Collateral Free)
  Collateral-free loans are available to all small and micro business sectors subject to the threshold and attached conditions as specified by the Act.
• Subsidy on Patent Registration
  A hefty 50% subsidy is given to the Enterprise who are holding the certificate of registration granted by MSME. This subsidy can be availed for patent registration by giving application to respective ministry.
• Overdraft Interest Rate Exemption
  Businesses or enterprises registered under MSME can avail a benefit of 1% on the Overdraft as mentioned in a scheme that differs from bank to bank.
• Industrial Promotion Subsidy Eligibility
  Enterprises registered under MSME are also eligible for a subsidy for Industrial Promotion as suggested by the Government.
• Protection against Payments (Delayed Payments)
  Usually, the buyers tend to delay the payment towards procurement of goods/ services. The MSME Act lends a helping hand to such enterprises by giving them the right to collect interest (as specified by MSME Act) on the payments that are delayed from the buyer’s side after prescribed date of acceptance of the goods/ services.
• Fewer Electricity Bills
  This concession is available to all the Enterprises that have the MSME Registration Certificate by providing an application to the department of the electricity along with the MSME certificate.
• ISO Certification Charges Reimbursement
  The registered MSME enterprises can claim the reimbursement of the expenses that were spent for the ISO certification.

Conclusion

MSMEs are rapidly growing industry with regular support from the government to push entrepreneurs to start their own venture. Therefore, knowledge about the registration process and its benefits is an absolute must in order to give a boost to the entrepreneurial spirit of MSME founders.

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Disclaimer
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