What is MSME?
MSME stands for Micro, Small, and Medium Enterprises. Any form of enterprise such as proprietorship, partnership, company etc. can get registered as MSME. In accordance with the Micro, Small, and Medium Enterprises Development (MSMED) Act in 2006, the enterprises are classified into two divisions.
- Manufacturing enterprises– engaged in the manufacturing or production of goods in any industry
- Service enterprises– engaged in providing or rendering services
MSME’s were earlier classified into Micro, Small and Medium category based on the investment in Plant and Machinery.
Manufacturing:-
- Micro: Investment <25 Lacs
- Small: Investment <5 Cr
- Medium: Investment <10 Cr
Service:-
- Micro: Investment <10 Lacs
- Small: Investment <2 Cr
- Medium: Investment <5 Cr
On 13th May 2020, Finance Minister Nirmala Sitharaman added the additional principle of turnover along with the investment. This will help the MSME Sector to grow.
- Micro: Investment <1 Cr and Turnover <5 Cr
- Small: Investment <10 Cr and Turnover <50 Cr
- Medium: Investment <20 Cr and Turnover <100 Cr
Benefits to MSME-
- Registered with Govt. of India hence becomes a Govt. Recognized firm
- Can bid for Government Tenders
- No/Less EMD (Earnest Money Deposit) required for Govt. Tenders
- Ease in getting land In SEZ
- Soft Loans from Commercial banks , SIDBI, SIDCs, NABARD
- Project Financing for expansion
- Ease in obtaining Long Term and Working Capital Loans – only margin money to be brought in by the entity
- Preferential interest rates
- Ease in obtaining loans through the MSME registration route
- Minimum loan amount up to Rs.5 lakh without collaterals
- Fast recoveries from Debtors
Financial Relief by Govt. for MSME during COVID -19 Pandemic–
- MSMEs availing Raw Material Assistance against Bank Guarantee prior to 01/03/2020 allowed moratorium of 03 months for repayment of outstanding dues
- Accounts of MSMEs to be frozen to avoid outstanding in the books in cases where outstanding is going to touch 99.99% of BG value.
- Prioritize lending to MSMEs from banks by including small enterprises in the earmarked priority sector and raising sub-target limit to 10% from 7.5%
Key announcements of Atma-nirbhar Bharat Abhiyaan
- Guarantee free and collateral free loans amounting to total Rs. 3.00 Lakh crores. there will be a moratorium of 12 months on payment of Principal
- Rs 20,000 crore Subordinate Debt for MSMEs
- Rs 50,000 cr equity infusion through MSME Fund of Funds
- No global tendering upto Rs. 200 crores in order to help the domestic companies in general and the MSMEs of the country in particular
- Promotion to e-marketing linkages
- Mandatory payment of receivables to MSMEs within next 45 days
- Reduction in rates of TDS and TCS by 25% in order to help the liquidity situations for MSMEs
- Extension in the compliance date of various income-tax related deadlines.
In order to avail the benefits under Atma-nirbhar Bharat Abhiyaan , the enterprise should fulfill the following criteria
- turnover and
- Investment in Plant and Machinery and
- should be registered as MSME.
- The enterprise should hold the Udhyog Aadhar certificate.
You can check my other blogs to know – How to obtain Udhyog Aadhar Certificate.
I am Indore based Charted Accountant and owns a CA firm in partnership with 10 other extremely talented CAs. We work as a team and bring out the best possible solution for our clients.