The MSME sector has become a major power behind the Indian economies growth. The inception of the MSME Development Act date back to 2006. Earlier on, the Small-Scale Industry certification was granted by the District Industries Centres. With the Udyog Aadhar Memorandum now things have also changed. In this blog, we aim to explain the implementation of Udyog Aadhaar Memorandum.
Historical Evolution of MSME Registration
The process for MSME registration has come with changes, including Small Scale Industry registration towards the Entrepreneurs Memorandum and Entrepreneurs Memorandum after the year 2006.
Entrepreneurs Memorandum and Entrepreneurs Memorandum: Post-2006 Changes
In 2006, the originally SSI registrations system was replace by the Entrepreneurs Memorandum, consisting of two category: EM-I and EM-II. EM-I is intended for entities gearing up to start business operations, while EM-II is for those already engaged in business activities.
This adjustment effectively brought the service sector within the scope of MSME registration. The Entrepreneurs Memorandum filing became a pivotal step in this process, necessitating submission to the respective District Industries Centres.
As technology advanced, certain States/Union Territories embrace digital solutions, computerizing the Entrepreneurs Memorandum filing process. However, some regions continued with traditional manual filing methods. In 2014, recognizing the need for a standardized approach, the Ministry of MSME collaborated with States/UTs to introduce the EM portal. This IT platform has since been adopted by many regions, streamlining the EM filing process and enhancing overall efficiency.
Implementation of Udyog Aadhaar Memorandum
Unlike the usually done registration processes, you only need to give your Aadhaar Number when you apply. This makes the whole process easier and quicker.
Using implementation of Udyog Aadhaar Memorandum has made registering much easier. There’s less paperwork and no application fees. This change is meant to make it simpler for small businesses to register without dealing with complicated steps.
Key Factors Regarding Implementation of Udyog Aadhaar Memorandum
Some key factors of implementation of Udyog Aadhaar Memorandum are:
· Superseding of EM I & EM II
The implementation of Udyog Aadhaar Memorandum supersedes the traditional Memorandum Part EM I & EM II, marking a shift in the registration framework for MSMEs.
· Optional Nature of UAM for MSMEs
While the filling of Udyog Aadhar Memorandum is optional for most MSMEs, it becomes mandatory for Medium-class enterprises.
· Access to Government Schemes for Pre-UAM Registered Units
Entities with SSI registration certificates predating the Udyog Aadhaar Memorandum or EM-II Memorandum can still access various government schemes.
· Optional UAM for Entities under EM II Registration
Implementation Of Udyog Aadhaar Memorandum is optional for entities already registered under EM-II.
· Accessibility Criteria for UAM
UAM is accessible only to functional entities, emphasising the importance of operational status for registration.
· Replacement of SSI Registration and EM-II
Implementation of Udyog Aadhaar Memorandum replaces the traditional SSI registration and Entrepreneurship Memorandum-If (EM-II) for all purposes.
· Acceptance by Regulatory Bodies and Financial Institutions
State and central government regulatory bodies, financial institutions, and banks are mandated to accept Udyog Aadhar Memorandum for all purposes.
· Changes in Pre-establishment Requirements
Previously, obtaining EM-II registration was a prerequisite for establishing an enterprise, along with the submission of various applications. The implementation of Udyog Aadhaar Memorandum eliminates this requirement.
· UAM Registration Post Commercial Operations
UAM registration is granted only after an entity commences commercial operations, and authorities no longer issue registration before establishment. EM-I registration no longer exists.
· Non-Demand of EM-I by Authorities
Regulatory bodies, utilities, tax authorities, local bodies, and banks are advised not to demand EM-I from applicants establishing new enterprises, as it is no longer a relevant document in the UAM framework.
Updated Procedure for MSME Registration
The MSME registration process has been streamlined, with an emphasis on simplicity and efficiency. The following steps give the updated procedure for MSME registration:
Step 1: Access the Udyog Aadhar Registration Portal
Start on with the registration process by visiting on the Udyog Aadhar Registration portal designed for MSME registration.
Step 2: Aadhar Authentication
Enter your 12-digit Aadhar Number and provide the name of the entrepreneur on the designated page.
Step 3: Validate & Generate OTP
Tap on the “Validate & Generate OTP” button, and subsequently, enter the OTP received to complete the verification process. Once verified, the online registration form will become visible on your screen.
Step 4: Form Submission and OTP Generation
Click on the “Submit” so for generation of an OTP. This OTP will be sent into the email address specified in the registration form.
Step 5: Enter Aadhar OTP and Final Submission
Enter the Aadhar OTP for the second time and proceed to click on the “Final Submit” button to conclude the registration process.
Step 6: Acknowledgment Number
Upon successful completion of the registration, an acknowledgment number will be provided to you via email.
Step 7: UAM Number Generation
Following the verification of details, the portal will generate the Udyog Aadhar Memorandum number specifically assigned to your business. This number serves as a unique identifier for your registered MSME.
Benefits of MSME Registration
The registration of entities under the Udyog Aadhar Memorandum offers several noteworthy benefits, as provided by both State and Central governments, including:
· Allocation of Space in SEZs for SSIs
To promote Small Scale Industries and micro-enterprises, Special Economic Zones are mandated to allocate ten percent of their space for SSIs.
· Timely Payment Protection under MSMED Act
Entities registered under MSME enjoy protection under the Micro, Small, and Medium Enterprises Development Act, ensuring timely payments for goods and services by buyers.
· Government Initiatives: Preferential Purchase Policy and Access to Credit
The government consistently supports the sector through policies such as preferential purchase policies and preferential access to credit, aiming to foster growth in MSMEs.
· Government Schemes and Incentives
Functional MSMEs registered under UAM benefit from a range of government schemes and incentives, spanning financing, marketing, training, and technical upgradation.
· Special Trademark Rules for SSIs and Micro-Industries
According to Trademark Rules 2017, specially provisions are in place for Small Scale Industries and micro-industries. Fees for or related to filing a trademark registration application are slashed by 50% for MSMEs under Schedule A of Trademark Rules 2017.
· Concessions under Performance Credit Rating
Entities registered under MSME are eligible to avail concessions under Performance Credit Rating, further supporting their financial standing.
· Subsidies under CLCSS (Credit Linked Capital Subsidy Scheme)
MSME registered enterprises can take benefit from subsidies of uptil 15% under the Credit Linked Capital Subsidy Scheme, with enhancing their access to credit and capital for business development further.
Final Thoughts
The implementation of Udyog Aadhaar Memorandum has in significant way simplified the registration process for MSMEs. Introduced by the Ministry of MSME, UAM, with its simplified requirement and Aadhaar-based verifications, has reduced bureaucratic hurdles that were there and eliminated unnecessary paperwork. The optional nature of UAM for most MSMEs, coupled with its mandatory requirement for Medium-class enterprises, reflects a tailored approach to diverse business sizes. This initiative not only eases the registration burden but also opens doors to various government schemes, subsidies, and benefits, fostering a more accessible and supportive environment for the growth of MSMEs in India.
