The government of India offers Micro, Small and Medium (MSME) industry registration. The MSME registration assists MSMEs in obtaining different government benefits for their creation and growth. However, before beginning with MSME registration, one must have certain documents available. This blog will provide a list of the documents required for MSME registration in India.
If a business is registered under the MSMEs Act, it can receive multiple benefits such as lower bank loans, tax breaks, preference during the tender process and access to other government initiatives and incentives. Udyam Registration, also known as MSME Registration in India, assists you in legally establishing your business and gaining access to government incentives and loans.
Benefits of MSME Registration
The registration of Micro, Small and Medium Enterprises (MSMEs) in India leads to a number of advantages for businesses, including:
1. Favourable Loan Rates
The most apparent benefit of MSME registration lies in the reduced cost of borrowing from banks. MSMEs enjoy significantly lower interest rates, often around 1-1.5%, a substantial reduction compared to regular loan interest rates.
2. Extended MAT Credit
MSME registration extends the horizon for carrying forward Minimum Alternate Tax (MAT) credit from 10 years to 15 years, thereby enhancing financial flexibility and planning for registered entities.
3. Reduced Costs and Rebates
The registration process brings tangible financial benefits. Costs associated with patent applications and industry setup are lessened as a result of various rebates and concessions offered to MSMEs.
4. Simplified Government Tender Access
MSME registration simplifies the acquisition of government tenders. Integration with platforms like the Udyam Registration Portal, Government e-Marketplace and State Government portals facilitates easier access to marketplaces and e-tenders.
5. One Time Settlement Fee
A unique advantage of MSME registration is the provision for a One Time Settlement Fee, which aids in addressing unpaid amounts for MSMEs.
6. Government Scheme Access
Registered MSMEs are entitled to utilise a host of government schemes. These include the Credit Guarantee Scheme, Credit Linked Capital Subsidy Scheme, Public Procurement Policy and safeguards against delayed payments, among others.
7. Priority Sector Lending
MSMEs qualify for priority sector lending from banks, enhancing their access to financial resources for growth and expansion.
8. Security Deposit Waiver
Participating in e-tenders is eased by the government security deposit waiver, benefiting MSMEs during bidding processes.
9. Diverse Activities under One Registration
A single MSME registration is versatile, allowing the inclusion of a multitude of activities—manufacturing, services or both—under one umbrella.
10. Barcode Registration Subsidy
Barcode registration is subsidised for MSMEs, facilitating smoother product identification and market access.
11. Direct Tax Exemption Scheme
MSMEs benefit from an exemption scheme on direct taxes, lightening the tax burden and promoting financial efficiency.
12. ISO Certification Fees Reimbursement
Registered MSMEs can avail reimbursement of ISO certification fees, promoting quality standards and compliance.
Classification of MSME Enterprises in India
MSMEs can be classified based on the old method and the revise new method of classification as per the government:
Old MSME Classification
In the past, Micro, Small and Medium Enterprises (MSMEs) were classified based solely on their investment in machinery or equipment. This approach had its perks, but it also meant that these businesses had to keep their investments below certain limits to access benefits. These limits were:
| Sector | Criteria | Micro | Small | Medium |
| Manufacturing | Investment | Less than Rs.25 lakh | Less than Rs.5 crore | Less than Rs.10 crore |
| Services | Investment | Less than Rs.10 lakh | Less than Rs.2 crore | Less than Rs.5 crore |
Revised MSME Classification
The new and revised MSME classification has brought in the following criteria:
| Criteria | Micro | Small | Medium |
| Investment & Annual Turnover | Less than Rs.1 crore & Less than Rs.5 crore | Less than Rs.10 crore & Less than Rs.50 crore | Less than Rs.50 crore & Less than Rs.250 crore |
Who Can Apply for MSME Registration?
The ambit of Udyam or MSME Registration includes a diverse range of enterprises from manufacturing, services, wholesale and retail trade, all guided by the revised MSME classification criteria, involving annual turnover and investment. The following entities are considered within the scope of MSME registration in India:
· Individuals, Startups, Business Owners and Entrepreneurs:
For those starting their ventures as individuals or within the startup ecosystem, the MSME registration is a good option.
· Private and Public Limited Companies:
Companies, regardless of their classification as private or public, are eligible to undertake the MSME registration process.
· Sole Proprietorship:
Enterprises owned and operated by sole proprietors can access the benefits of MSME registration.
· Partnership Firms:
The collective efforts of partnership firms can be aligned with MSME registration, for growth and benefits.
· Limited Liability Partnerships (LLPs):
The modern business landscape accommodates the inclusion of Limited Liability Partnerships (LLPs) under the umbrella of MSME registration.
· Self Help Groups (SHGs):
Entities working collaboratively within the framework of Self-Help Groups can use the advantages that MSME registration offers.
· Co-operative Societies:
Co-operative societies, instrumental in various sectors, have the opportunity utilise the advantages of MSME registration.
· Trusts:
Enterprises operating under the aegis of trusts can file for MSME registration, to use its potential for growth.
What are the Documents Required for MSME Registration in India?
MSME/Udyam Registration is an important step for businesses in India to avail various benefits and support offered by the government. To initiate this process, certain essential documents are required, including:
1. PAN Card
A PAN (Permanent Account Number) card is an obligatory document for any financial transaction in India. This 10-digit unique identifier, assigned by the Income Tax Department, is vital for tax-related matters. It serves as a proof of identity for the business owner and is a fundamental requirement for MSME/Udyam Registration.
2. Aadhaar Card
The Aadhaar card, a 12-digit unique identification number issued by the Indian government, is another essential document for MSME/Udyam Registration. This card incorporates biometric information, such as fingerprints and iris scans, making it a reliable proof of identity and residency. Its inclusion reinforces the credibility of the registration process.
3. Business Address Proof
Verification of the business’s registered address is important for the registration process. A valid proof, such as a rent agreement, electricity bill or property tax receipt, is required. This document should clearly state the business’s name, address and owner’s name, ensuring transparency in the registration process.
4. Bank Statement
Evidence of financial transactions is a vital aspect of MSME/Udyam Registration. Providing a bank statement from the business’s current account of the past 6 months is mandatory. This statement should include the business’s name, account number and address, serving as concrete proof of financial activities. It’s a prerequisite, especially when seeking loans from financial institutions.
5. GSTIN
For GST-registered businesses, submitting the Goods and Services Tax Identification Number (GSTIN) is essential. GST, an indirect tax levied on goods and services, mandates registration for businesses with a turnover exceeding Rs. 20 lakhs. Inclusion of the GSTIN strengthens the legitimacy of the business for registration purposes.
6. Certificate of Incorporation or Partnership Deed
In cases of registered companies or Limited Liability Partnerships (LLPs), the presentation of a certificate of incorporation or partnership deed is essential. The certificate of incorporation is a formal recognition from the Registrar of Companies (ROC) regarding the business’s formation. A partnership deed outlines the terms and conditions of a partnership, enhancing transparency.
7. NOC from Landlord
If the business operates from a rented property, obtaining a No Objection Certificate from the landlord is mandatory. This document affirms that the landlord consents to the business’s utilisation of the premises for commercial purposes. Its inclusion ensures compliance and legitimacy in the registration process.
8. Details of Major Business Activities
Providing a comprehensive description of the business’s operations, complete with National Industrial Classification (NIC) codes, is vital for the registration process. This information offers the Registrar insight into the nature of the business and aids in determining eligibility for government schemes and benefits.
Additional Requirements for MSME/Udyam Registration
Beyond the primary documents outlined above, there are supplementary details that contribute to a comprehensive MSME/Udyam Registration process. These details provide a detailed understanding of the business’s operations and financial standing and include:
Aadhaar-Linked Phone Number: Linking the Aadhaar card to a valid phone number reinforces the legitimacy of contact information.
Turnover Details: Accurate turnover information, as per the MSME definition, provides insight into the business’s scale and operations.
Investment Details: Documenting investments in plant and machinery showcases the business’s assets and capabilities.
Licences and Bills: Submission of licences and bills associated with machinery proves the business’s adherence to regulatory requirements.
Sales and Purchase Bills: Providing copies of sales and purchase bills demonstrates the business’s financial activities and transactions.
Final Thoughts
MSME Registration offers a wide range of benefits for businesses in India, including favourable loan rates, extended MAT credit, reduced costs, simplified government tender access and more. The revised MSME classification considers investment and annual turnover but in order to avail its benefits, eligible entities need to make sure they have the documents required for MSME registration in India.
Eligibility extends to individuals, companies, partnerships and co-operatives. Document requirements include PAN, Aadhaar cards, address proofs, bank statements and certifications. This simplified process of MSME registration strengthens businesses’ legitimacy and access to government support, contributing to a strong MSME sector for India’s future growth.
For more information on documents required for MSME registration in India, connect with our experts at StartupFino.
