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Overview

What is MSME?

MSME stands for Micro Small and Medium Enterprises. In developing countries MSME sector is called the growth engine of the nation. Strengthening MSMEs would have multifold effect of boosting the economy and generating employment as well as reduce issues relating to migration of skilled, unskilled workers and professionals to metro cities.

MSMEs contribute in industrialization of rural and backward areas, reducing regional imbalances through the best utilization of their resources, ensuring equitable distribution of national income and wealth, being major partner in the process of inclusive growth.

Strategic Importance of MSMEs in India


Initiatives Taken by Government of India For MSMEs

Make in India

Make in India initiative was launched by the Government of India on 25th September 2014 with a vision to develop India into a Global Manufacturing Hub. This flagship initiative aims to increase Foreign Direct Investment (FDI), encourages innovation, skill development, Make India digital, creation of jobs, companies to manufacture in India and to build a sustainable eco-system for businesses in India.

Hon. Prime Minister Narendra Modi while launching the Make in India initiative scheme said, “I want to tell the people of the whole world: Come, make in India. Come and manufacture in India. Go and sell in any country of the world, but manufacture here. We have the skill, talent, discipline and the desire to do something. We want to give the world an opportunity that come make in India.”

Pillars of Make in India
New Processes

‘Make in India’ recognises ‘ease of doing business’ as the most significant factor to promote entrepreneurship, for that it has undertaken several measures. The aim is to de-license and de-regulate the industry during the entire life cycle of a business.

New Infrastructure

Our Existing infrastructure needs to be developed for increasing growth of the industry, Government intends to develop industrial corridors and smart cities with state-of-the-art technology and high-speed communication that will boost innovation and research base of India.

New Sector

The government of India has identified 25 Priority sectors manufacturing, infrastructure and service activities and detailed information is being shared through interactive web-portal and professionally developed brochures. Visit https://www.makeinindia.com/sectors for more details.

New Mindset

Make in India intends to change industry’s existing mindset of seeing government as a Regulator to a new mindset as a Facilitator.

Impact of Make in India on MSMEs

Make in India initiative facilitates the expansion of MSMEs, encourages them to focus on innovation and improve their manufacturing processes. Majority of businesses in India have limited owner/promoters contribution little , as a result they are majorly dependent on credit (loans) to set up their enterprise. This initiative brings investments by way of FDI to MSME's, which will allow them to expand their business and resolves their Issues related to credit availability.

Make in India initiative also places importance on the ‘Zero Defect and Zero Effect’ model which means high quality products with zero wastage and without any adverse effect on the environment. To promote this among MSMEs the government has launched a Financial Support to MSMEs in ZED Certification Scheme.

As a part of Make in India initiative the government has undertaken various measures for the purpose of Ease of Doing Business thereby reducing some of the burden of MSME Sector. India’s ranking in ‘World Bank's Ease of Doing Business Ranking 2020’ has also jumped 79 positions from 142nd in 2014 to 63rd in 2019.

Few areas in which measures have been undertaken for Ease of Doing Business are as follows:

Starting a Business
  1. PAN, TAN and DIN merged into single form for Company incorporation and ease in reserving name of company.
  2. PF and ESIC registration are available at Shram Suvidha portal as a common online service with no physical touch point.
  3. No requirement of inspection before registration under Shops & Establishment Act in Mumbai and Delhi.
Trading Across Borders (Import and Export)
  1. Implementation of ‘Indian Customs Single Window Project’ to facilitate foreign trade. This allows importers and exporters to electronically lodge their Customs clearance documents at a single point.
  2. Mandatory documents required for import and export reduced to only 3.
  3. E-Sanchit, an online application system, allows traders to file all documents electronically.
  4. The electronic self-sealing of the container at the factory has reduced time and cost for exporting firms.
  5. A computerized risk management system has brought transparency and reduced frequency of custom inspections significantly.
  6. Facility of Advance Bill of Entry.
Enforcing Contracts
  1. New cases in district courts are assigned to Judges randomly through an automated system in Delhi and Mumbai.
  2. E-filing of cases introduced in district courts of Mumbai and Delhi.
Getting Electricity
  1. Electricity connection is now provided maximum within 15 days.
  2. Number of documents for getting connection now reduced to two and no physical documents are accepted.
  3. Total number of procedures reduced to 3 in Delhi and 4 in Mumbai.
Resolving Insovency
  1. The Insolvency and Bankruptcy Code, 2016 has introduced new dimensions in resolving insolvency in India. It is India’s first comprehensive legislation on corporate insolvency.Recently the governmnet has also introduced Pre-packagaed Insolvency for MSMEs.
  2. Under Fast-track Corporate Insolvency Resolution Process (CIRP) for mid-sized companies, the process for insolvency shall be completed within 90 days with a maximum grace period of another 45 days.
Paying Taxes
  1. Reduction of corporate tax to 25% for mid-sized domestic companies.
  2. Domestic companies can opt for concessional tax regime @ 22% (effective tax rate: 25.17% inclusive of surcharge and cess). Such a company cannot claim any income tax incentive or exemption. Such companies are not liable to pay the Minimum Alternate Tax (MAT).
  3. New Domestic manufacturing companies can opt for concessional tax regime @ 15% (effective tax rate: 17.16% inclusive of surcharge and cess) subject to certain conditions. Such a company cannot claim any income tax incentive or exemption. Also these companies are not liable to pay the Minimum Alternate Tax (MAT).
  4. Robust IT infrastructure of online return filing for Indian taxpayers.
  5. The Goods and Service Tax came into effect from 01st July, 2017. It subsumes eight taxes at the Central and nine taxes at the State level.
  6. The Employee State Insurance Corporation (ESIC) has developed a fully online module for electronic return filing with online payment. This has substantially reduced the time to prepare and file returns.

For more details Visit: https://www.makeinindia.com/eodb


Startup India

Startup India initiative was announced by the Hon. Prime Minister Narendra Modi during his speech on 15th August, 2015 and it came into force on 16th January 2016. This initiative aims at creating a robust Start-up ecosystem in the country for nurturing innovation and providing opportunities to budding entrepreneurs along with employment generation and wealth creation.
In order to meet the objectives of this initiative, the government announced an action plan spanning across areas such as “Simplification and handholding”, “Funding support and incentives” and “Industry-academia partnership and incubation” which includes various benefits, exemptions and support that would be given to startups An Eligible startup needs to apply for Registration and get recognized by The Department for Promotion of Industry and Internal Trade (DPIIT) to claim the benefits available under this initiative

Benefits Available Under Startup India Initiative

Intellectual Property Rights (IPR) benefits

Rebate on filing of application - Startups are provided with an 80% rebate in filing of patents vis-a-vis other companies, bringing down the cost from INR 8,000 to INR 1,600. This helps them cut down on costs in their early years. 50% rebate is also provided in filing of trademarks vis-a-vis other companies decreasing the cost from INR 10,000 to INR 5,000.
Panel of facilitators - To assist in IP applications. Facilitators are responsible for providing general advisory on different IPRs, and information on protecting and promoting IPRs in other countries. Central Government bears the entire fees of the facilitators for any number of patents, trademark or designs, and startups only bear the cost of the statutory fees payable.
Fast-tracking of startup patent applications - The patent application of startups is fast-tracked for examination and disposal. The process is much faster for Recognised Startups.

Self-certification under Labour and Environment laws

Entity will be allowed to self-certify compliance with 6 Labour Laws & 3 Environment Laws i.e. no inspections will be conducted for a period of 3 to 5 years. Inspection will only be conducted on receipt of credible & verifiable complaint of violation. This will ease the burden of compliance for the startup.
6 Labour laws are
The Building and Other Constructions Workers’ (Regulation of Employment & Conditions of Service) Act, 1996
The Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979
The Payment of Gratuity Act, 1972
The Contract Labour (Regulation and Abolition) Act, 1970
The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
The Employees’ State Insurance Act, 1948

3 Environment Laws are
The Water (Prevention & Control of Pollution) Act, 1974
The Water (Prevention & Control of Pollution) Cess (Amendment) Act, 2003
The Air (Prevention & Control of Pollution) Act, 1981

Income Tax exemption and benefits

Exemption on Profits for 3 Years - The recognised startups that are granted an Inter-Ministerial Board Certificate are exempted from income-tax for a period of 3 consecutive years out of 10 years since incorporation.
Exemption from Angel Tax under section 56(2)(viib) - Angel Tax i.e section 56(2)(viib) is applicable when a closely held company issues its shares to a resident person at a price which is more than its fair market value calculated as per prescribed rules. This section becomes applicable in majority cases when startups want to raise money through issue of shares as the valuation determined for issuing shares is more than fair market calculated as per rules. However, a DPIIT recognized startup is given exemption from this section, subject to certain conditions
Relaxations in case Employee Stock Option Plan (ESOP) of Startups - In order to ease the burden of payment of taxes by the employees of the eligible start-ups or TDS by the start-up employer, TDS or tax payment has been deferred to earlier of the following period

  1. On expiry of 48 months from the end of Assessment year in which ESOPs are exercised
  2. At the date when employee leaves the company
  3. At the date of sale of shares allotted under ESOP

Relaxation in public procurements norms

Startups can bid for government tenders and become a seller to the Government through the Government e-Marketplace (GeM) and other channels
Government of India has authorised its ministries, departments and public sector undertakings to relax norms in all public procurements. Startups are given exemptions relating to

  1. Prior Year Turnover
  2. Prior Experience
  3. Earnest Money Deposits
Fund of Funds for Startups (FFS)

To provide equity funding support for development and growth of innovation driven enterprises, the government has set aside a corpus fund of INR 10,000 Cr managed by SIDBI. The fund is in the nature of Fund of Funds, which means that the government participates in the capital of SEBI registered Venture Funds, who invest twice the amount in startups (For instance, if contribution sought is Rs 100 crore under FFS, Venture Capital Fund should invest at least Rs 200 crore in Startups). The flow of funds is from Government to SIDBI to Venture Capital Funds to Startups 424 Startups including Dunzo, CureFit, Unacademy, Fresh to Home have been supported under FFS as on 31st March, 2021

Seed Fund Scheme

Easy availability of capital is essential for entrepreneurs at the early stages of growth of an enterprise. Funding from angel investors and venture capital firms becomes available to startups only after the proof of concept, prototype development, product trials, market entry and commercialization has been established. Similarly, banks provide loans only to asset-backed applicants. To resolve this issue the Startup India Seed Fund Scheme is introduced to provide financial assistance to startups for proof of concept, prototype development, product trials, market entry and commercialization

Faster exit for Startups

Ministry of Corporate Affairs has notified Startups as ‘fast track firms’ enabling them to close down operations within 90 days as against 180 days for other companies. Startups with simple debt structures or those meet such criteria as may be specified may be wound up within a period of 90 days from making of an application for winding up on a fast-track basis.

Various other benefits such as Capital Guarantee Fund for Startups, Organization of Startup Fests for Showcasing Innovation and Providing a Collaboration Platform, Launch of Atal Innovation Mission (AIM) with Self Employment and Talent Utilization (SETU) Program

What is an Eligible Startup?

Eligible Startup means a Private Limited Company or Partnership Firm or a Limited Liability Partnership

To Register Your Startup You Can Visit https://www.startupindia.gov.in/

For Any Assistance You Can Contact Us

To Avail Our Start-up Registration Service Click Here


Other Initiatives

As per Budget of FY 2021-22
  • Rs 10,000 crore has been allocated to Emergency Credit Line Guarantee Scheme (ECLGS). Under this Scheme MSMEs can avail collateral free loan from banks or NBFC. The guarantee for the loan is given by Government of India
  • Rs 2,500 crore has been allocated to Prime Minister’s Employment Generation Programme (PMEGP). Under this scheme an MSME can get certain percentage of total project cost as a subsidy
  • Rs 905.04 crore has been allocated for Schemes under Khadi Village and Coir Industries
  • Rs 570.93 crore has been allocated for Entrepreneurship and Skill Development center Scheme. Under this Scheme MSMEs can avail Non-Monetary Benefits such as Training, Workshops, Competitive Studies, Technical Support, Marketing and Research
Under Aatmanirbhar Bharat Abhiyaan
  • Rs. 20,000 Crores Subordinate Debt for stressed MSMEs. This Scheme will support MSMEs to restart their business and produce new jobs. Functioning MSMEs which are NPA or are stressed will be eligible to avail benefits of this.
  • Rs. 50,000 Crore Equity infusion for MSMEs through Fund of Funds. Under this Scheme, Rs.10000 crore fund/ corpus to be set up to bring equity which is acutely short in MSME. MSME can expand its business and enable to get listed on main board of Stock Exchanges
  • No global tenders for Government procurement of upto Rs. 200 crores
  • Emergency Credit Line Guarantee Scheme
  • Production Linked Incentive worth Rs.1.46 Lakh Crore is being offered to 10 champion sectors.
As per Public Procurement Policy
  • Every Central Ministry /Department / PSUs shall set an annual target for 25% procurement from Micro and Small Enterprises (MSEs).
  • A sub-target of 4% out of 25% target of annual procurement earmarked for procurement from MSEs owned by SC/ST Entrepreneurs.
  • Procurement from Micro and Small Enterprises, 3 % from within the 25% target shall be earmarked for procurement from MSEs owned by Women.
  • 358 items are reserved for exclusive procurement from MSEs.
  • For MSEs Registered with National Small Industries Corporation (NSIC), Tender sets are free of cost and exemption is given from payment of earnest money.
  • In case of tenders, participating MSEs that have been registered with NSIC and who are quoting price within price band of L1+15 per cent shall also be allowed to supply a portion of requirement by bringing down their price to L1 price in a situation where L1 price is from someone other than a Micro and Small Enterprise and such Micro and Small Enterprise shall be allowed to supply up to 20 per cent of total tendered value. Eg – L1 Price = Rs 1000 per kg (L1 price means the lowest quotation received) Your Micro or Small Enterprise has quoted a price per kg of upto 1150 per kg In such a situation even though your quotation price is not the lowest you will be given an opportunity to lower your price to L1 price and supply the goods.
Protection from Delayed Payment

As per the MSMED Act, 2006 in case of supply of goods and services by Micro and Small Enterprises the payment shall be made by the buyer on the date agreed between the buyer and the seller in writing or, in case of no agreement, before the Appointed day. However, in no case the period agreed between seller and buyer shall exceed more than 45 days.
If the buyer fails to make payment of the amount to the supplier, he shall be liable to pay compound interest to the seller on the amount from the appointed day or, on the date agreed on, at three times of the Bank Rate notified by Reserve Bank. MSME Samadhan portal has been created specifically to facilitate online applications regarding delayed payments.

MSME Portals/Platforms

Launching various Portals/Platforms to resolve various issues faced by MSME’s. Some of portals are as follows

To Know More About These Portals Click Here
Other Schemes and Benefits
  • Various other schemes such as Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Scheme of Fund for Regeneration of Traditional Industries (SFURTI), Financial Support to MSMEs in ZED Certification Scheme, Mudra Loans under Pradhan Mantri MUDRA Yojana (PMMY), Seed funding and Venture Capital schemes, and many more.
  • Various tax benefits and exemptions under Income Tax and GST for MSMEs
To Avail Benefits Under These Initiatives You Can Contact Us

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