MSME – Definition and Benefits

12 March 2021

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:

Enterprise Category Investment in Plant & Machinery/ Equipment Turnover
Micro Does not exceed INR 1 Crore Does not exceed INR 5 Crore
Small Does not exceed INR 10 Crore Does not exceed INR 50 Crore
Medium Does not exceed INR 20 Crore Does not exceed INR 250 Crore
MSME Definition

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.


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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The content of this article is for information purpose only and does 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. The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that the Author / Treelife Consulting 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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