Small Scale and ancillary units (i.e. undertaking with investment in plant and machinery of less than Rs. 10 million) should seek registration with the Director of Industries of the concerned State Government.
The main purpose of Registration is to maintain statistics and maintain a roll of such units for the purposes of providing incentives and support services. States have generally adopted the uniform registration procedures as per the guidelines. However, there may be some modifications done by States. It must be noted that small industries is basically a state subject. States use the same registration scheme for implementing their own policies. It is possible that some states may have a 'SIDO registration scheme' and a 'State registration scheme'.
They are summarised as follows:
Features of the scheme are as follows:
1. DIC is the primary registering centre registration is voluntary and not compulsory.
2. Two types of registration is done in all States. First a provisional registration certificate is given. And after commencement of production, a permanent registration certificate is given.
3. PRC is normally valid for 2 years and permanent registration is given in perpetuity.
The registration under Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 is for facilitating the promotion and development and enhancing the competitiveness of Micro, Small and Medium enterprises.
The following slabs have been prescribed under the MSMED Act to determine the status of the Enterprise:
|No.||Type of Enterprise||Manufacturing Enterprises
(Investment in Plant and Machinery)
(Investment in equipment)
|1.||Micro||Does not exceed Rs. 25 Lakh||Does not exceed Rs. 10 Lakh|
|2.||Small||Exceeds Rs. 25 Lakh but does not exceed Rs. 5 Crore||Exceeds Rs. 10 Lakh but does not exceed Rs. 2 Crore|
|3.||Medium||Exceeds Rs. 5 Crore but does not exceed Rs. 10 Crore||Exceeds Rs. 2 Crore but does not exceed Rs. 5 Crore|
All classes of enterprises, whether Proprietorship, Hindu undivided family, Association of persons, Co-operative society, Partnership firm, Company or Undertaking, by whatever name called can apply for the registration and get qualified for the benefits provided under the Act.
A Medium enterprise engaged in the manufacture or production of goods has to compulsorily register under the MSMED Act. For other Enterprises the registration is discretionary or optional.
Taking into consideration the benefits available under the Act, it is recommended that every enterprise shall opt for the registration.
The registration scheme has no statutory basis. Units would normally get registered to avail some benefits, incentives or support given either by the Central or State Govt. Benefits available under the MSMED Act Registration of Micro, Small and Medium (MSM) Enterprises under MSMED Act is a very powerful medium to enjoy the regime of incentives offered by the Centre generally contains the following:
(It is to be noted that the Banking Laws, Excise Law and the Direct Taxes Law have incorporated the word SSI in their exemption notifications. Though in many cases they may define it differently. However, generally the registration certificate issued by the registering authority is seen as proof of being SSI).
States/UTs have their own package of facilities and incentives for small scale. They relate to development of industrial estates, tax subsidies, power tariff subsidies, capital investment subsidies and other support. Both the Centre and the State, whether under law or otherwise, target their incentives and support packages generally to units registered with them.
The Buyers have to ensure whether those suppliers of goods and services are under the purview of MSMED Act i.e. the Buyers have to confirm the registration of the suppliers under the MSMED Act.
The Buyer should ensure the payment before the end of credit period decided else the interest would be payable.
In case of disputes, application to Micro and Small Enterprises Facilitation Council (MSEFC) would trigger the conciliation and arbitration process. Once the application is done under MSEFC, there is no provision to withdraw the proceedings. Therefore, the Buyer should ensure the best ways to resolve the disputes, if any, instead approaching to MSEFC in the initial stages of dispute.
The Buyers need to ensure that the Buyer does not owe any outstanding amount including interest due to MSM Enterprises for more than 15 days. Otherwise, the Buyer needs to disclose this non-payment in the Annual Financials of the Buyer.
The Act provides for the payment of compound interest at 3 times the Bank Rate by the Buyer in case of failure to make the payment with in maximum of 45 days from the date of receipt of goods or services.
Where any buyer is required to get his annual accounts audited under any law for the time being in force, such buyer shall furnish the following additional information in his annual statement of accounts, namely: -
- The principal amount and the interest due thereon (to be shown separately) remaining unpaid to any supplier (micro or small enterprise) as at the end of each accounting year.
- The amount of interest paid by the buyer along with the amounts of the payment made to the supplier beyond the appointed day during each accounting year.
- The amount of interest due and payable for the period of delay in making payment (‘payment’ here means the payment which have been made but beyond the appointed day during the year and without adding the interest thereon specified under this Act for the period of delay).
According to the Income Tax Act, 1961 the amount of interest payable or paid by any buyer, for delayed payments to Micro and Small Enterprises shall not be allowed as deduction for the purpose of computation income under the Income Tax Act, 1961. Printing of MSMED Registration/EM Number on the letter heads
The Micro and Small Enterprises should mention/get printed on their letter heads, supply order sheets, invoices, bills and other relevant documents, the MSMED Registration/Entrepreneurs Memorandum (EM) Number allotted by a competent authority, so that there remains an identification of being a MSE supplier.
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