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:
Registration
- Micro and Small Enterprises - discretionary.
- Medium enterprises in service sector- discretionary.
- Medium Enterprises (Manufacturer) – compulsory
IF YOU ARE MSME
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
- Payments within 45 days: payment to such entity to be made within 45 days on delivery of goods and services. In case of delay beyond the time frame, interest shall be paid by to such seller at bank rate as notified by RBI from time to time.
Note:
- “the payment shall be made 60 days from the date of delivery”, then that portion of the contract shall be void. The payment has to be made within 45 days
- “the payment shall be made 30 days from the date of delivery”, then payment has to be made within 30 days and payment of interest shall be applicable from 31st day rather than 46th day.
- Reporting in Annual Accounts: If you are a company / LLP or such other entity whose accounts are supposed to be audited, then the following is to be reported in the audit report:
- delayed payments and interest thereon remaining unpaid as at the end of each accounting year;
- interest paid to micro or small enterprise suppliers during each accounting year;
- interest accrued and remaining unpaid at the end of each accounting year
Note:
- One time and Annual reporting to ROC (for companies only): as per recent amendments to Companies Act, following returns are to be submitted :
- ONE TIME RETURN : to report total outstanding amount to Micro and Small enterprise which is due beyond 45 days as on 22nd January 2019.
- HALF YEARLY RETURN: to report cases where payments were due to Micro and Small enterprise beyond 45 days during half year (arp-sep, oct-mar).
Note:
- NIL return not be filed
- last date 30 June 2019
- reporting to be done invoice-wise
PRECAUTIONS TO BE TAKEN
- At the time of vendor registration, obtain the MSME status and proof of registration.
- Purchase order to mention:
- Vendor to report immediately in case of change in MSME status
- Delivery of goods or services would be considered to be completed when invoice for the same is delivered to the office of the buyer.
- __% may be retained by the buyer until proper testing and inspections are carried out / the buyer is satisfied with the services of the supplier.
- Every person/department to be advised to handover the invoices to finance person/department immediately