Operations of MSME / SSI – Explained

We have come across the words MSME/SSI quite often. Are these the same or is there a difference? Let us have a look.

MSME stands for Micro, Small and Medium Enterprises while SSI stands for Small Scale Industries. Before the MSMED act came into existence, companies were being registered as SSI if their operations were on a very small scale. The MSMED act brought in two more categories to define an enterprise.

What are MSME/SSI?

MSMEs are broadly classified as

1.     Manufacturing industries
2.     Services industries

With the emergence of the MSMED act, an enterprise will be defined as follows:

So essentially, SSI fall in the middle tier above where the total investment is between ₹25 lakhs and ₹5 crores in the manufacturing sector and between ₹10 lakhs and ₹2 crores in the services sector. Hence, there is not much difference between MSME and SSI, rather MSME is an umbrella term and SSI is a component of the same.

In order to get recognized as an MSME or SSI, an entrepreneur might have to register their business under the MSMED act. Though MSME registration is still statutory and not yet been mandated, registering the business is beneficial for the business owner. Let us see how.

 Benefits of MSME Registration

MSMEs form the backbone of any emerging economy like India. The Government is fully aware of this and offers an array of benefits to the registered MSMEs so as to foster their growth and contribute to the progress of the nation. However, in order to avail these benefits, a small or medium business enterprise needs to be registered as an MSME. Let us now focus on the benefits a registered MSME can enjoy:

• Collateral-free loans
  Registered MSMEs can avail collateral-free loans under the Credit Guarantee Trust Fund for Micro and Small Enterprises. These are available for new as well as existing businesses.

• Subsidy on patent registration
  Upon registering as an MSME, the enterprise is eligible for a hefty 50% subsidy on patent registration. The same can be availed by applying to the concerned ministry.

• Subsidy on trademark registration 
  Businesses (specific categories) registered as MSME are also eligible for a 50% subsidy on trademark registration.  

• Interest rate exemption on overdrafts
  Registered MSMEs are eligible for a 1% exemption on the interest rate on overdrafts subject to terms and conditions of the issuing bank.

• Industrial Promotion Subsidy 
  Enterprises registered as MSMEs are provided an industrial promotion subsidy to encourage entrepreneurship.

• Protection against delayed payments 
  The MSME ministry protects registered businesses against any kind of delay in payments by the buyer, over and above the agreed-upon duration and the right of interest on the delayed payment from the buyer through reconciliation or arbitration and dispute settlements.

• Concession on electricity bills
  By providing a copy of the MSME certificate, the business owners can apply to the electricity department, for a concession on electricity bills.

• Reimbursement of ISO certification charges
  An MSME certificate also enables industries to claim a reimbursement of the expenses incurred towards procuring an ISO certification, by duly applying to the concerned ministry.

• Receive exclusive benefits
  Apart from all of the above, industries registered as MSMEs are liable to receive a host of exclusive benefits from the Government including licenses and permits and are given priority on Government tenders.

How to get MSME registration

The following information is required for MSME registration of any business:

1.     Business PAN card
2.     Applicant’s Aadhar card
3.     Business address proof
4.     Owner’s name and contact details
5.     Social category
6.     Business name and type
7.     Bank details 

The applicant can register online without a fee by filling relevant details with necessary documents. Alternately, there are several consultants that help with the process for a nominal fee. After processing, a digital certificate will be issued.

The MSME sector has a great potential to boost the economy of the country. By being registered as MSMEs, the business can avail of the exclusive benefits mentioned above and also provide impetus to the country’s economic growth.