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In a historic move, the Ministry of MSME (Micro, Small and Medium Enterprises) has created new guidelines for both the classification and registration of MSMEs. This new guideline was implemented effective 1 July, 2020. So, what are the major changes that you should be in the know of. This article will help you understand these revisions and how it impacts you.
Revised MSME Definition
Unlike earlier guidelines, the new definition does away with the distinction between businesses involved in the manufacturing and service sectors. This essentially means that both the manufacturing and service sectors will come under a common definition. All businesses will be defined on a composite criteria of investment size and annual turnover. This means that a business, to be classified as an MSME, must fulfil both criteria i.e. Investment size and annual turnover must be met.
|MSME New Definition|
|Composite Criteria: Investment and Annual Turnover|
|Investment||Up to ₹1 Crore||> ₹1 Crore – ₹10 Crore||> ₹10 Crore – ₹50 Crore|
|Turnover||Up to ₹5 Crore||> ₹5 Crore – ₹50 Crore||> ₹50 Crore – ₹250 Crore|
Note: export sales not included in turnover for the purpose of the definition.
Benefits of The New Definition
To understand the benefits of the new MSME guidelines, it’s important to understand how banks and enterprises stand to gain.
|Better profitability due to enhanced size. Helps improve quality of lending (fewer NPA).||Avail benefits of economies of scale and increase profits.|
|Scope to increase lending portfolio||Generate more employment with increased volume|
|Help to achieve priority sector lending targets.||Implementation of latest technology|
|Boost in exports through stronger sales|
Features of The Guidelines
A notable feature of the new guideline is that it supersedes all earlier notifications for classifications and registrations of MSMEs. This means that entrepreneurs need only to refer to this notification that they may have. To add to that, the new guidelines states that an MSME will be known as an UDYAM, which is the Sanskrit word for enterprise. That brings us to the registration process which is called UDYAM Registration.
What is UDYAM Registration?
The Ministry of Micro, Small and Medium Enterprises has laid down clear guidelines for UDYAM registration. These guidelines are mentioned below.
To register with UDYAM Registration, entrepreneurs must visit the official UDYAM website: https://udyamregistration.gov.in/Government-India/Ministry-MSME-registration.htm. It is important to keep all related documents handy before starting the registration process.
Why is it beneficial for a business to get UDYAM Registration?
There are a number of benefits of getting an UDYAM registration. These benefits are listed according to the schemes offered by the government for the development of Micro, Small and Medium enterprises. These benefits can only be availed by enterprises that have successfully completed the UDYAM registration process and obtained the MSME certificate.
Types of MSME Loans Available for Enterprises
Financing is a key element for a business to grow and expand operation. Entrepreneurs today have a number of different options when it comes to MSME loans.