Know About the Eligibility & Procedure for MSME Registration in India
MSME refers to micro, small, and medium enterprises in India. The MSME Act was passed in 2006 to enhance the development of micro, small, and medium enterprises (MSMEs) and foster competitiveness among them. The MSMEs receive certain benefits, which even large-sized companies are not given. They have advantages like getting easy and cheap bank finance at low rates. Such firms also have better control over their product quality and interaction with end consumers. They are also in a position to make decisions quicker compared to large firms.
In growing economies, MSMEs have a huge impact since they generate several employment opportunities. Realizing their significance, the government launched the MSE-CDP (Micro and Small Enterprises – Cluster Development Program) for the smooth functioning of this sector. Firms who qualify for setting up MSEs should know everything about the MSME registration process to reap the advantages of this scheme.
MSE-CDP is aimed to enhance productivity and encourage competitiveness among MSEs by concentrating on their particular requirements. Clusters are groups of firms that offer similar services or products.
Clusters fall into two types which are:
- Industrial: Such clusters could either have a turnover of at least Rs. 100 million or could consist of 100 firms. Micro, small, medium or even large enterprises can form clusters. It is also including the production units with contract workers.
- Micro-enterprise: This includes all household enterprises. Examples of such enterprises include handicraft or handloom units, which hire mostly home-based workforce.
The Government’s Objectives Behind the MSE-CDP
- To create centres for training, to support production operations, and for testing
- Develop and improve the infrastructural amenities in the MSEs’ industrial areas
- Help the MSE to enhance their capacity by building support groups, and associations
- Help the MSEs to sustain and flourish by tackling issues like quality, skills, financial access, and technological advancement
Criteria for Eligibility and Application Process for MSE-CDP
Eligibility: Any group, cluster, or association providing similar services and producing similar goods can apply for MSE-CDP.
Application process: The applicant needs to visit the website and then sign up and apply for registration. After filling the form online, the application hard copy must be given through state government, autonomous organizations, or field institutes of the MSE industry. MSE-CDP’s steering committee approves the application, and the applicants’ registration is completed.
Highlights of MSE-CDP and Its Significance
Before talking about the MSME registration process, let us discuss the main features of MSE-CDP:
Included in this are activities that aim to implement changes in attitude in the existing working cycle of the MSE cluster. It also comprises of activities to improve technology, create general awareness, build trust, motivation, and development of the market.
A report called the Diagnostic Study Report (DSR) is prepared that outlines the plan of action, objectives to attain, and performance indicators. Making a DSR is essential, and soft activities commence after its approval. The time allotted for the soft intervention would be around eighteen months unless extended. Each cluster would get Rs. 25 lakhs maximum. 75% of the approved project cost would be part of the Government of India (GoI) grant. Government grant would be 90% for units owned by women, SC/ST units, clusters having more than 50% micro village, hill stations, and North Eastern states.
Detailed Project Report (DPR)
A DPR needs to be prepared and approved before the project commences, such as a Common Facility Centre (CFC). It should comprise financial analysis with all details, estimated balance sheet, and profit and loss account.
The government grant will not exceed Rs. 5 lakh for creating a project report stating the viability of a project like developing the infrastructure of new industrial areas, or setting up a CFC. The government will approve half the amount post-approval. It will sanction the rest after the report’s acceptance.
It comprises activities like developing Common Facility Centers (CFCs) to be used for research and development or training, logistic centre, processing centre, and others.
Special Purpose Vehicle (SPV)
It is essential to form an SPV before setting up a CFC, and at least 20 MSE cluster units should be members of the SPV. However, in exceptional cases, authorities will only approve 10 MSE units.
The state government or the SPV will bear the finance for setting up the CFC. The expenses include land cost, which should not be more than 25% of the total project cost, building expenses, cost of buying other assets, and preliminary costs. The project cost should not be more than Rs. In other words, 15 crores out of which the government grant covers 70%. The government grant could comprise 90% of the cost in the case of clusters owned by women, SC/ST units, 50% micro village, and also for hill stations and states in North-East India.
Development of Infrastructure
This scheme comprises providing amenities like roads, drainage, water, power supply, and pollution control for MSEs. The project should finish within two years following approval. The project cost should not exceed Rs. 10 crores and the GOI grant will take care of 60% of the approved project cost. In the case of clusters with more than half micro village, women-owned, or SC/ST units, and North Eastern states and Hill stations, the GOI grant will cover 80%. Any additional cost in excess of Rs. 10 crores will be borne by the state government/UT.
The government has launched several schemes like MSM-CDP to encourage MSMEs. If you want to take advantage of these schemes and run your business successfully, you need to do MSME registration online. The qualified and experienced 3E Accounting team has supported several entrepreneurs over the years and will be glad to help you easily register your business and complete all formalities. For instance, we will provide you with assistance to register MSME and avail of the prevailing government grants to successfully run your business.