In a growing country like India, Micro, Small, and Medium Enterprises (‘MSME’) play a critical role. Many economists have stated that small and medium-sized businesses constitute the backbone of the economy. The MSME sector employs around 45 percent of India’s entire industrial workforce, accounts for roughly half of the country’s total exports, and accounts for almost 95 percent of the country’s total industrial units, producing around 6000 different goods. MSMEs are helping to drive the country’s overall economic growth and prosperity. The Micro Small and Medium Enterprises Development Act of 2006 (‘MSMED Act’) governs registrations and applications for manufacturing and service businesses. The MSMED Act became effective on October 2, 2006. It was created with the goal of assisting, developing, and expanding small businesses.
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While the current Coronavirus pandemic is affecting the rest of the globe, India and Indian companies have been particularly hard hit. To deal with the impacts of the pandemic-induced lockdown and keep their businesses viable, even major corporations and established companies have been compelled to take drastic cost-cutting measures. Smaller firms, such as MSMEs, must be in a difficult situation. In order to survive this difficult moment, some small firms have been forced to shut down their operations altogether or fall into debt. Given the current situation, the Indian government is implementing a huge economic stimulus with a special focus on MSMEs in order to better equip them in order to aid rehabilitation and ensure upliftment. They are entitled to a range of benefits as a consequence of their MSME/SSI (‘Small Scale Industries’) registration under the MSMED Act.
The following are some of the advantages:
1. Collateral Free Bank Loans:
The Indian government has announced that all firms in the small and micro company sectors will be eligible for collateral-free loans. This program guarantees that funding is available for MSMEs and SSIs. Existing, as well as new businesses, can make use of the benefits outlined in this program. The Government of India, the Small Industries Development Bank of India (‘SIDBI’), and the Ministry of Micro, Small, and Medium Enterprise Development established the Credit Guarantee Trust Fund Scheme to guarantee that this scheme is implemented for all MSMEs/SSIs.
2. Application for a Patent:
MSMEs/SSIs that are registered are eligible for a 50% subsidy. Only if a copy of the application is submitted to the relevant government is this incentive available for patent registration.
3. Interest Rates on Overdrafts are Exempt:
Registered MSMEs/SSIs are entitled to a 1% discount on overdrafts; however, the scheme’s execution varies by bank, thus clarification should be obtained from the bank offering the overdraft facility.
4. Industrial Promotion Subsidy Eligibility:
The Indian government also guarantees that registered MSMEs/SSIs are eligible for subsidies on industrial promotion expenditures. The amount of the subsidy is controlled by the Ministry of Micro, Small, and Medium Enterprises, and it is included in the budget on a monthly basis.
5. Protection against delayed payments:
Buyers of MSMEs/SSIs’ services or goods frequently delay or fail to make payments due to them. With the goal of assisting small businesses, the Ministry of Micro, Small, and Medium Enterprises of the Government of India codified the right to charge interest on late payments from their buyers/customers. The government has published recommendations suggesting that such conflicts be resolved in the shortest amount of time possible through conciliation, arbitration, and other such procedures. If any MSME/SSI registered enterprise supplies/provide any goods/services to a buyer/customer, the buyer/customer is required to make the full payment on or before the agreed-upon payment date as per the agreement between the parties, or within 15 days from the day they accepted the goods and services from MSME/SSI registered business in cases where the payment date is not specified. If the buyer/customer does not pay for the items or services within 45 days after accepting/consuming them, the buyer/customer will be charged compound interest on the amount agreed to be paid for the products/services provided/rendered.
6. Concession on electricity bills:
All registered MSMEs/SSIs can take advantage of this set rate of concession by submitting an application to the Electricity Department or their relevant DISCOM, along with a copy of their MSME/SSI registration acquired under the MSMED Act.
7. ISO Certification Fees Reimbursement:
Any money spent by registered MSMEs/SSIs to achieve ISO certification is eligible for reimbursement from the Government of India upon submission of an application along with the required paperwork.
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MSMEs are the backbone of our economy, and it is critical that an increasing number of small companies register under the MSMED Act in order to benefit from the aforementioned benefits. The Government of India takes the phrase “ease of doing business” extremely seriously, particularly for MSMEs/SSIs, as seen by the advantages provided to registered MSMEs/SSIs and the newly announced economic stimulus package, which includes numerous measures tailored exclusively for MSMEs.