Micro, Small, and Medium Enterprises (MSMEs) play a critical role in the economic development of a country. In India, MSMEs contribute significantly to the GDP and provide employment to a large portion of the population.
To support and regulate these enterprises, the Government of India has introduced several schemes and registration processes over the years.
two key terms associated with the registration and classification of these enterprises are MSME Registration and Udyam Registration. This article explores the differences between these two terms, their significance, and their implications for businesses.
MSME Registration
Overview
MSME Registration refers to the process of registering micro, small, and medium enterprises under the Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006. This registration aims to provide MSMEs with various benefits such as subsidies, tax incentives, and easier access to credit. The MSME classification was based on the investment in plant and machinery or equipment.
Classification Criteria
Prior to the introduction of Udyam Registration, the classification of MSMEs was as follows:
Micro Enterprises: Investment in plant and machinery or equipment does not exceed INR 25 lakh (for manufacturing) and INR 10 lakh (for services).
Small Enterprises: Investment in plant and machinery or equipment is more than INR 25 lakh but does not exceed INR 5 crore (for manufacturing) and more than INR 10 lakh but does not exceed INR 2 crore (for services).
Medium Enterprises: Investment in plant and machinery or equipment is more than INR 5 crore but does not exceed INR 10 crore (for manufacturing) and more than INR 2 crore but does not exceed INR 5 crore (for services).
Process and Benefits
The process of MSME Registration involved submitting an application form along with the required documents to the respective state’s MSME office. Upon successful registration, enterprises received a unique MSME registration number and a certificate.
Benefits of MSME Registration included:
Priority sector lending from banks
Subsidies on patent registration and industrial promotion
Protection against delayed payments from buyers
Concession on electricity bills
Access to government tenders reserved for MSMEs
Udyam Registration
Overview
Udyam Registration, introduced on July 1, 2020, is a new and simplified process for the registration of MSMEs. The government launched Udyam Registration to replace the old MSME registration process and to bring more transparency and ease of doing business. It is an online registration process based on self-declaration and does not require any documentation or proof.
Classification Criteria
Under Udyam Registration, the classification of enterprises is based on both investment in plant and machinery or equipment and turnover. The revised criteria are as follows:
Micro Enterprises: Investment does not exceed INR 1 crore and turnover does not exceed INR 5 crore.
Small Enterprises: Investment does not exceed INR 10 crore and turnover does not exceed INR 50 crore.
Medium Enterprises: Investment does not exceed INR 50 crore and turnover does not exceed INR 250 crore.
Process and Benefits
The Udyam Registration process is entirely online and requires an Aadhaar number for registration. The steps involved are:
Visit the Udyam Registration Portal: The registration can be done on the official Udyam Registration portal.
Enter Aadhaar Details: The applicant must provide their Aadhaar number and other personal details.
Fill in Business Information: Information about the enterprise, such as its name, type, address, and bank details, must be provided.
Self-Declaration: The applicant declares the investment and turnover details.
Receive Udyam Registration Certificate: Upon successful submission, an Udyam Registration number and certificate are generated.
Benefits of Udyam Registration include:
Simplified and paperless registration process
Automatic categorization and upgradation of enterprises based on the information provided
Easier access to government schemes and incentives
Protection against delayed payments
Priority sector lending
Concessions on utility bills and government tenders
Key Differences Between MSME and Udyam Registration
Registration Process
MSME Registration: Required physical submission of forms and documents.
Udyam Registration: Completely online, based on self-declaration with no need for physical documents.
Classification Criteria
MSME Registration: Based solely on investment in plant and machinery or equipment.
Udyam Registration: Based on both investment in plant and machinery or equipment and turnover.
Documentation
MSME Registration: Required documentation for proof of investment and other details.
Udyam Registration: No documentation required, only Aadhaar number and self-declared information.
Ease of Access
MSME Registration: Time-consuming and involved physical verification.
Udyam Registration: Simplified, quick, and entirely online.
Government Schemes and Benefits
MSME Registration: Provided various benefits but was less streamlined.
Udyam Registration: Provides streamlined access to benefits and integrates with various government portals for ease of doing business.
Conclusion
The introduction of Udyam Registration marks a significant improvement over the previous MSME registration process. It simplifies the registration process, broadens the classification criteria to include turnover, and enhances ease of access to various government benefits and schemes.
For MSMEs, this transition means less paperwork, quicker processing, and more opportunities for growth and development. By understanding the differences between MSME and print Udyam Registration, businesses can better navigate the regulatory environment and leverage the available benefits to their advantage.