WHAT IS MSME

Entity type: Any class or classes of enterprises, whether proprietorship, HUF, association of persons, co-operative society, partnership firm, LLP, company or undertaking, by whatever name called.

Eligibility:

MANUFACTURING UNIT
Enterprise Investment in plant and machinery*
Micro Less than Rs. 25 lacs
Small More than 25 lacs but less than Rs. 5 crores
Medium More than 5 Crores but less than Rs. 10 crores
SEVICE SECTOR
Enterprise Investment in equipment
Micro Less than Rs. 10 lacs
Small More than 10 lacs but less than Rs. 2 crores
Medium More than 2 Crores but less than Rs. 5 crores

*calculation of plant and machinery:

Inclusions: Import duty, shipping charges, custom clearance charges, sales tax/vat/gst
Exclusions: the cost of pollution control, research and development, industrial safety devices, installation charges, power generation set, fire fighting equipment, etc.

Registration

IF YOU ARE MSME

Benefits to MSMEs are offered by central government as well as state government. Hence, they differ from state to state. Some of the benefits are mentioned below:

Priority Lending: Banks, by virtue of the directions issued by the Reserve Bank of India, have certain earmarked funds that have to mandatorily be given to MSME businesses. Producing this certificate entitles one to avail this loan on a priority basis with less hassles.

Less interest rates and availability and access to greater credit: with an MSME Registration, all banks are specifically instructed to offer loans at interest rates lower than the usual and one may be able to avail this benefit from several banking institutions for their financing needs.

Income Tax benefits: The benefit of a presumptive basis of taxation is available to enterprises, which relieves one from maintaining detailed books of accounts and undergoing audit procedures.

Credit Linked Guarantee Scheme: This scheme allows collateral-free loans of up to 50 lakhs for individual MSMEs.

Market assistance from the government and Export Promotion: registration as MSME gives access to all of various platforms organized by government for international cooperation on trade-related aspects with different countries and fosters new business connections. The government also incentivizes export of goods and services by MSMEs by way of subsidies, tax exemption, and technical support.

Capital and other grants for infrastructure development: The government also identifies training sectors for MSME and gives capital grants for improvisation of the infrastructure and support for entrepreneurial development.

Exclusive purchases and sheltering from competition: The Central Government follows a Price and Purchase Preference policy under which more than 358 items are listed for exclusive purchases by Central Government from medium, micro and small units only.

Technology and quality upgradation support to MSMEs: The government reimburses expenditure incurred for implementation of clean technology, preparation of audit report and subsidies for licensing products according to national and international standards.

Protection against delay in payment from Buyers: It is mandatory for buyer to pay for the goods and services procured from MSME entities within 45 days from the date of delivery. In case of delayed payment, interest shall also be paid by buyers to the MSME entity.

Other benefits: some other benefits include Stamp duty and Octroi benefits, Time-bound resolution of disputes with Buyers through conciliation and arbitration, Waiver in Earnest Money (Security Deposit ) in Government tenders, etc.

IF YOU DEAL WITH MSME

If your entity is doing business with a Micro and Small enterprise (not medium enterprise) and procuring goods and services from such entity, then following compliances are to be done:

Note:

Overriding effect: Please note that the above mentioned provision has overriding effect on any on any other law or contract. For example, if you enter into contract with an Micro or small enterprise vendor stating that:

Note:

Interest paid to such enterprise on delayed payment cannot be claimed as deduction while computing taxable income under income tax act.

Note:

PRECAUTIONS TO BE TAKEN

With all the strict reporting requirement, following precautionary measures may be taken up by the entities dealing with Micro and Small enterprise (every entity whose accounts are being audited):
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