UNLOCKING - THE MSME CODE

Introduction:

MSME stands for Micro, Small and Medium Enterprise. In accordance with the Micro, Small, and Medium Enterprises Development (MSMED) Act. In 2006, these enterprises are classified into two divisions—Manufacturing enterprise, and Service enterprise:

The MSME sector is the backbone of the Indian Economy, since MSME PRODUCE AND MANUFACTURE VARIETY OF PRODUCTS FOR BOTH DOMESTIC AS WELL AS international markets, they help promote the growth and development of various product segments and industries. Further MSME play an important role in generating employment opportunities. It helps in the industrialization of backward and underprivileged areas.

Recently in June 2020 GOI have redefined MSME’S in terms of its level of Investment & Turnover. So, that more & more companies can avail maximum benefit of Govt. Subsidies & Sops. The investment and turnover figures were changed to larger values, there by resulting in more numbers of medium sized enterprises can be benefited out of it.

THE NEW CLASSIFICATION:

·??????Micro:?Where level of Investment <Rs. 1 Crore??& Annual Turnover < Rs. 5 Crore.

·??????Small:??Where level of Investment < Rs 10 Crore?& Annual Turnover < Rs 50 Crore.

·??????Medium:Where level of investment < Rs 50 Crore & Annual Turnover <Rs. 250 Cr.

Looking to the classification we as Entrepreneurs can take lot of benefits from Govt. Schemes which are not always Interest based, or fund based schemes but also are in form of subsidies, and Tax holidays etc.

MSME’S through their various business ventures enable citizen to venture out on their own and in turn give back to society by creating new jobs, they have also steadily revived artisan class in remote areas of the country by providing opportunities of showcasing their talents and converting into employment avenues. The MSME’s are always inn support of technology and its upgradation, infrastructure development which helps in modernization of country and society as a whole.

Basic Overview of MSME In India

·??????Total Registered MSME`s????????????????????????????51 Million

·??????Contribution to total Manufacturing output?????45 %

·??????Contribution to Exports?????????????????????????????????50 %

·??????Total Industrial Enterprises????????????????????????????80 %

·??????Contribution to GDP????????????????????????????????????20 %

·??????MSME is the growth engine across the world

·??????All big Industries depend on its survival on MSME`s in India

·??????These MSME`s has made India to become one of the fastest growing Economies

This is the contribution of MSME’s in India’s Growth Story. Total Registered MSME’s is 51 Million. And in terms of absolute numbers MSME’s contribute a staggering 30% to the country’s GDP and around 45% of the manufacturing output and approximately 45% of the country’s exports. MSME has created 11 Crore Jobs opportunities in India and employing 40% of Indian Workforce. This is the reason it’s the backbone of India’s economic development and the reason why they are so crucial to be supported. Now with the pandemic gradually and slowly waning and economic activity is slowly coming back to life, it becomes more sense for business owners to get their MSME Registration done and avail a wide array of benefits. Though??Registration which are optional and If you are not registered as MSME then you are losing the opportunity from getting advantages of Govt. Schemes.

CHAMPIONS -?Single window system for MSMEs

Getting Registered as a MSME: ADVANTAGE START

In a recent initiative by Government of India, Ministry of MSME to handhold the registered Business entrepreneurs in their venture and providing them encouragement and support along with solving their problems and grievances in taking their business forward have come up with a portal called CHAMPION PORTAL. It’s a sort of control room for solving issues online.

What is CHAMPIONS Portal?

It’s an acronym which stands for?Creation &?Harmonious?Application of?Modern?Process for?Increasing?Output &?National?Scheme

Creation and Harmonious Application of Modern Processes for increasing the output and National Strength (CHAMPIONS)

Champions.gov.in is with features like AI Artificial Intelligence, Data Analytics and Machine Learning with fully integrated Real-Time basis grievance portal like CPGrams

·??????Single window system to promote a unified, empowered, robust, bundled and technology driven platform for helping and promoting the MSME’s

·??????Aimed at making the smaller units big by helping and handholding, in particular, by solving their problems and grievances.

Three basic objectives of the CHAMPIONS

·??????To help the MSMEs in this difficult situation in terms of finance, raw materials, Labour, permissions etc.

·??????To help the MSMEs capture new opportunities in manufacturing and services sectors

·??????To identify the sparks i.e. the bright MSMEs who can withstand at present and become national and international champions

So, before we try to understand the Benefits of MSME, lets know the process of Registering as MSME

Now to take your objective of being a complete MSME, most important, is the Registration as MSME. All those MSME already registered previously under any scheme or by any Registration Authority under MSME has to re- register under New process called Udhyam Registration which was applicable from 1st?July’20.

Who can apply for MSME?

·??????Proprietorship

·??????Own- One Person Company

·??????Limited Liability Partnership (LLP)

·??????Private Limited company

·??????Limited Company

·??????Association of Person

·??????Co Operative Society

The Benefits of being Registered and Part of MSME growth story are immense and will give a first mover advantage.

The Benefits can be classified as both Tangible & Non-Tangible, Fund Based and Non-Fund based.

So first & foremost you get your Basics under control

·??????Proof of Legal Existence.

·??????Marketing support/ Assistance (Bar Code) e g. Assistance will be provided for Participation in exhibition within India for Stall rent etc. Assistance in creating Bar code.

·??????Reimbursement of Certification/ Accreditation fees for ISO etc. With a Vision to encourage domestic products to be globally competitive and to promote quality certification to obtain ISI/WHO-GMP & ISO.

·??????Subsidy on Patent Registration

·??????Credit Rating Support

·??????Concession in Electric Bills

·??????Preference in Government Tenders

·??????International Push

·??????Protection Against Delayed Payments

These are just a few examples of level of support MSME gets on getting registered.

Udyam Registration – Details

·??????All existing enterprises registered under EM-II or UAM?shall register again?on Udyam Registration Portal?on or?after July 1, 2020.

·??????For classification as Micro Small, and Medium Enterprise, composite criteria of Investment and Turnover will be considered.

·??????The calculation of Investment in plant and machinery or equipment (including all tangible assets excluding land and building, furniture, and fixture) will be ascertained through the Income Tax Return of the Previous year. In case of a new enterprise, not having prior ITR, the investment will be based on self-declaration of the promoter.

·??????For the calculation of turnover, on self-declaration of the promoter.

·??????For the calculation of turnover, exports of goods or services or both shall not be considered.

·??????On completion of registration an e-certificate called “Udyam Registration Certificate” will be issued

Draft MSME Policy

Though the major benefits of being Registered as MSME’s are fund based. And since my vision is Ethical business practice and in an Interest free environment, I will not go into much detail on fund based benefits, as you will find lot of material on fund based financing on the other hand, Interest free financial products (Sharia Compliant Products) are flexible and are also compliant with all applicable Indian laws though in its infancy stage, but its formation is with the vision of fulfilling the requirements of our Ethical MSME’s enterprises for providing them Interest (Riba) free financing.

?But still, we need to know what the Government is providing us in terms of fund Based financing.

Fund-Based

·??????Credit Facilities through Banks with Low Interest rate

·??????Term Loans for Fixed Assets

·??????Working Capital Requirement

·??????Exemption of Interest

·??????Overdraft Facilities

·??????Priority Sector Lending

Non-Fund Based

·??????Guarantees

·??????Letter of Credit

·??????Foreign Bank Guarantees

·??????Foreign Letter of Credit

?It’s the Government’s intentions to lift the Spirit of MSME’s as it is the backbone of the economy. Government has initiated various programmed for the growth of MSME Sector.

·??????To Create E-Market linkage for MSME’s to act as replacements for Trade fair and Exhibition. E.G GeM

·??????Technology DRIVEN SYSTEM TO ENHANCE TRANSACTIONS BASED LENDING USING DATA FROM E-MARKET PLACE

·??????Government will continuously monitor settlement of dues to MSME Vendors from Government and Central PSU’s

?List of key schemes for MSMEs

Central Govt. Schemes

·??????Prime Minister`s Employment Generation Program (PMEGP)

·??????CGTMSE Scheme

·??????PMMY-MUDRA Scheme

·??????Standup India

·??????Standup India

·??????Startup India Seed Fund Scheme

·??????Entrepreneurship and skill Development Program (ESDP)

State Govt. Schemes & Other

·??????State Package Scheme of Incentives

·??????SIDBI Schemes for MSMEs

·??????Bank Schemes for MSMEs

·??????Local Bodies for Incentive schemes

·??????Other

SIDBI

KEY Facilities

Small Industries and Development Bank of India (SIDBI) focuses on the financing, promoting and development of the MSME’s. Established in 1990, SIDBI’s primary objective is to strengthen the MSME sector by facilitating cash flow. SIDBI assists MSME’s to get funds for the development, commercialization and marketing of their innovative products and services. SIDBI offers customized financial products under several loan schemes and provides other business handholding support. SIDBI PROVIDES FUNDING VIA Banks, NBFC’s SFC’s and other financial institutions.

?Direct Loan products of SIDBI

·??????SIDBI Make in India Soft Loan Fund for Micro Small and Medium Enterprises (SMILE)

·??????Smile Equipment Finance (SEF)

·??????Loans under Partnership with OEM

·??????Working Capital (Cash Credit)

·??????SIDBI Trader Finance Scheme (STFS)

·??????Loan for Purchase of Equipment for Enterprise`s development (SPEED)

Suggested approach for availing Govt. schemes

·??????Finalize the entity type

o??Proprietorship

o??Registered??Partnership

o??Limited Liability partnership or

o??Private Limited Company

·??????To avail benefits under the Women Entrepreneurship Scheme and loan under the Stand-Up India Scheme / women should hold at least 51% shares

·??????Apply for Udyam Registration

·??????Compare benefits under the Central Government Schemes and State Government Schemes and then decide which one to opt

·??????Apply for schemes well before investing your own funds in the project??