Micro, Small and Medium Enterprises – MSMEs, contribute about 40% of industrial production and 45% of exports. These figures clearly indicate the importance of the MSME sector for growth of the Indian economy. Understanding the importance of MSMEs, the Government of India enacted Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act, 2006) with an aim to promote and develop micro, small and medium enterprises.

All types of business entities, whether it is Proprietorship, Partnership, Private Limited Company, Limited Liability Partnership etc are eligible for MSME Registration. MSME Registration is Aadhaar based registration and is also known as Udyog Aadhaar.

MSME Registration is not mandatory however it is advisable to register your business as this will make the enterprise eligible for benefits under the MSMED Act, 2006. Benefits of MSME Registration include:

Credit Guarantee Scheme 

The MSMEs are eligible for collateral free loans up to Rs. 1 crore under the Credit Guarantee fund Trust for Micro and Small Enterprises (CGTMSE Scheme). This is a collateral free loan and the Central Government takes guarantee of the borrower.

Subsidies

Central Government and State Governments announce different schemes and subsidies for the MSME sector from time to time.

Priority Sector Lending

To improve the timely funds availability to the MSME Sector, the Government of India has classified loans to MSMEs under priority sector lending. The banks are required to have 20% year on year growth in lending to MSMEs.

Benefits announced by State Governments

Various State Governments also announce benefits to MSME sector from time to time. The benefits include power tariff subsidies, development of specialised industrial estates, tax subsidies, capital investment subsidies to name a few.

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