India is a country of talented and innovative youngsters who are willing to create for this country and bring changes to society. Enterprises have been the foundational pillars of the Indian economy since the beginning. With the initiation of the MSMED act in 2006, many micro, small, and medium enterprises have utilized multiple benefits of being registered under the MSME act as MSME/SSI. If you are an entrepreneur looking for support for your new venture, you must know how you can use the benefits of MSME registration in India.
Let us see the benefits of MSME registration for Indian entrepreneurs-
Why Get an MSME Registration?
Every new entrepreneur should get an MSME registration to gain benefits such as.
Benefit #1- You get collateral-free governmental and bank loans:
To help micro and small sector industries, the Government of India launched the Credit Guarantee Fund Scheme (CGS), which provides collateral-free credit to both old and new businesses registered with MSME. The Government of India has set up a trust fund- Credit Guarantee Fund Trust (CGTMSE), along with the Ministry of Micro, Small and Medium Enterprises (MSME) and Small Industries Development Bank of India (SIDBI) to allocate these loans. Additionally, the finance minister of India also declared a collateral-free automatic loan of up to 3 lakh crores for small businesses. These businesses faced heavy losses during the COVID-19 pandemic where their products or services were not purchased, or their clients did not pay their owed money and left them with unpaid invoices. The said credit was provided so these small businesses could recover from the losses and debts successfully.
Benefit #2- OverDraft interest rate exemption:
When a business is registered with the MSME, they can avail of benefits of 1% on the OverDraft, where the conditions are dependent on their banks. Exempted interest rates allow enterprises to recover from losses they face during unfavorable market trends.
Benefit #3- Subsidy on patent registration:
MSME ministry understands the importance MSMEs play in innovating new technologies and products that help society. To help the micro, small, and medium scale enterprises continue their innovations, the MSME ministry provides a 50% subsidy to the MSME registered enterprises on patent registration fees. The business applies to avail of the subsidy to the respective ministries.
Benefit #4- Direct exemptions on income tax:
According to the government scheme, new businesses get a direct exemption from paying income tax for the first year. The exemption is a great relief for the new businesses as they can now focus on their operations instead of devoting their time to detailed bookkeeping habits and complex auditing processes. However, the activities of the business can affect the benefit of MSME.
Benefit #5- 15% subsidy of Credit Linked CGSTI Subsidy Scheme (CLCSS):
The Ministry of micro, small, and medium enterprises (MSME) understands how technological advancement in a business can help them increase their production and minimize errors while improving efficiency. CLCSS is a scheme for MSMEs for their technological upgradation. The scheme launched in 2000 offers a subsidy of 15% and cannot cross 15 lakhs, and the maximum limit of loans for the subsidy calculation is 100 lakhs. Biotechnology industries pharmaceuticals, food processing, and industries based on medicinal and aromatic plants are some industries out of many that can avail of CLCSS.
How Does MSME Help the Indian Government?
The Indian government has always supported small businesses by providing them with various requirements. With MSME, entrepreneurs get better benefits, and the country gets better socio-economic developmental chances. The MSME act also helps the government by giving more job opportunities in well-established and new sectors. According to a study, there are 6.08,41,245 MSMEs actively operating in India, generating over 45% employment, 50% exports, and 95% industrial units.
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