What Do You Mean by MSME Classification?

Initially, when the government introduced the MSME registration in 2006, the MSME classification was based on the investment criteria in plant and machinery or equipment. The government revised the MSME classification by inserting annual investment and annual criteria. Also, the distinction between the manufacturing and the services sectors under the MSME definition was removed.

The following is the current revised MSME classification, where the investment and annual turnover are to be considered for deciding if an entity is considered as an MSME:

Documents Required for MSME Registration

The MSME registration documents are as follows:

• Aadhaar card
• PAN card

There are no MSME registration fees and it does not require proof of documents. PAN and GST-linked details on investment and turnover of enterprises will be taken automatically by the Udyam Registration Portal from the Government databases since the portal is integrated with Income Tax and GSTIN systems.

GST registration is not compulsory for enterprises that do not require a GST registration. However, enterprises that mandatorily need to obtain GST registration under the GST law, must enter their GSTIN for obtaining the MSME Registration.

How to Apply for MSME Registration on Udhyam Registration?

The Udyam Registration portal is a government-backed portal that is in sync with Income Tax and GSTIN systems. Acquiring GST registration is not a mandate for enterprises that fall outside the scope of GST law. But, the enterprises that fall under the GST regime need to secure GST registration to obtain Udyam Registration.

• The MSME registration can be secured by applying on the Udyam portal and the portal shall charge no fees for rendering such a registration. 
• After applying, a confirmation message shall appear on the computer screen enclosing the reference number of the said application.
• The MSME ministry shall grant the MSME certificate or Udyam Registration certificate to the applicant’s email id after completing the verification formalities. The MSME shall grant the MSME registration after a couple of days from the date of application submission. 
• The MSME certificate remains valid for a lifetime and seeks no renewal. 
• The entrepreneurs can download the MSME certificate from the respective account created on the Udhyam Registration portal. 

Points to Ponder:

• Those who possess UAM registration or any other registration accorded by any authority under the MSME must seek re-registration on the Udyam Registration Portal by selecting the option “For New Entrepreneurs who are not registered yet as MSME or those with EM-II”.
• The enterprises with UAM registration need to opt for Udyam Registration through the migration process by 31/12/2021.
• If the entrepreneurs fail to comply with the above condition, then the UAM registration shall be flagged invalid, and they will not receive any benefits under the MSME scheme.

Benefits offered by MSME Registration to the Small Scale Units

• MSME registration holders have access to cheaper loans with an interest rate as low as 1.5%. 
• Ensures credit relating to MAT, i.e. minimum alternate tax to be carried forward for up to five years instead of 10 years. 
• MSME registration ensures the availability of any rebates and concessions for the 
• MSME registration holders can avail concessions on patent registration. 
• MSME registration holders can use Udyam Registration Portal to get access to Government e-Marketplace and e-tenders.
• One Time Settlement Fee for MSMEs confronting payment issues with vendors. 
• The Udyam Registration shall aid the MSMEs in securing benefits of following government schemes.

1. Public Procurement Policy 
2. Credit Linked Capital Subsidy Scheme
3. Credit Guarantee Scheme

• Entities with MSME registration are eligible for priority sector lending from banks.
• MSMEs have access to the government security deposit waiver, which is beneficial while taking part in e-tenders.
• Ensures subsidy for Barcode registration
• Ensures Exemption on Direct taxes through different tax saving schemes
• Fees relaxation for ISO certification 
• Electricity bills concession.
• Ensure exposure to trade fairs conducted at the domestic and global level

Who can Apply for Udyam Registration?

All manufacturing, service industries, wholesale, and retail trade that fulfil the revised MSME classification criteria of annual turnover and investment can apply for MSME registration. Thus, the MSME registration eligibility depends on an entity’s annual turnover and investment. The following entities are eligible for MSME registration:

• Individuals, startups, business owners, and entrepreneurs
• Private and public limited companies
• Sole proprietorship
• Partnership firm
• Limited Liability Partnerships (LLPs)
• Self Help Groups (SHGs)
• Co-operative societies
• Trusts