MSME Certification Can Help Startups in India

7 Ways How MSME Certification Can Help Startups in India

in Business

Micro, Small, and Medium Enterprises are often abbreviated as MSME which is governed by the MSMED Act, 2006 [Micro, Small & Medium Enterprises Development Act, 2006]. As per this act, the sectors in which the enterprises can opt for MSME registration are split into three different categories;

– Manufacturing Sector

– Service Sector

– Defined by investment limit

Again, the investment limit divides the MSME into three other categories:

Type of Enterprise Manufacturing sector Service sector
Micro-enterprise Plant & machinery investments up to ₹25 lakhs. Equipment Investments up to ₹10 lakhs.
Small enterprise Plant & machinery investments – more than ₹25 lakhs but limited to ₹5 crores. Equipment Investments – more than ₹10 lakhs but limited to ₹2 crores.
Medium enterprise Plant & machinery investments – more than ₹5 crores but limited to ₹10 crores. Equipment Investments – more than ₹2 crores but limited to ₹5 crores.

Entrepreneurs going ahead with MSME registration may fall under any of the parameters mentioned above to leverage the advantages it offers. Another term used for such a registration is Udyog Aadhar Registration.

Below are the key benefits that the government provide to MSMEs,

Collateral-Free Borrowings

MSMEs benefit from the Credit Guarantee Fund Trust that enables credit facility without any requirements for collaterals or third party guarantees. Even under the circumstances where when MSME unit turns as a defaulter, the CGFT can bear up to 85% of the loss amount.

The enterprise needs to pay a certain amount of guarantee and the annual service fee to avail such a facility. Check out this table below to get insights on how much of a maximum guarantee the trust can cover.

MSME Certification

2. Tech Support

All the eligible MSE units can get 15% of capital subsidy up to a maximum of ₹15 lakhs from the Credit Linked Capital Subsidy Scheme (CLCSS). Such a subsidy is exclusively allotted to the small and medium enterprises for a technology upgrade.

3. Supporting Energy Conservation

The manufacturing MSMEs can now adopt more energy-efficient technologies, and the Technology Upgradation Support facilitates that to Micro, Small Enterprises (TEQUP). It also strengthens the competitiveness among manufacturing MSMEs by providing the capital subsidy of up to 25% of the project cost with a maximum of ₹10 lakhs. The government can provide 25% of the project cost, but the rest of such energy-conserving technology remains funded by financial institutions and banks.

4. Supporting Product Quality Certifications

The TEQUP, as mentioned above, also works to subsidize licenses from national and international bodies that manufacturing MSME units would require to stay competitive. Currently, each MSME can avail ₹1.5 lakhs from the government to get the product licenses for National Standards. And, for the international standards, the same is ₹2 lakhs per MSME.

5. Setting-up Business Incubators

There is a provision of creating incubators by the Support for Entrepreneurial and Managerial Development of SMEs that aims to support new business ideas. Also, the financial assistance can range anywhere from 75% to 85% of the project cost that can go up to maximum ₹8 lakhs per idea. Alternatively, it can also be per unit that stays limited to a total of Rs.62.5 lakhs for 10 ideas.

The business incubators can avail grants for up to ₹2.50 lakhs solely for infrastructure development. And for training and administrative expenses, it is ₹1.28 lakhs and 0.22 lakh, respectively.

6. Support for ISO certifications support

The government will reimburse 75 % of the spending for ISO certificate with the maximum amount being ₹75,000. Each unit is reimbursed for letting MSEs acquire the ISO certification.

7. Supporting the credit rating support

Micro and small enterprises can leverage the subsidized payable rating fee under the credit rating support scheme. The maximum available subsidy is lesser of the two – 75% of fees or ₹40,000.

Check out the turnover and share slabs as approved by the ministry of MSME towards the fees that the credit rating agency charges:

Turnover Fees that MSME ministry will reimburse
Rs.50 lakhs+ Rating agency charged fees – 75% with a ceiling of Rs.25,000/-
Rs.50 lakhs+ up to Rs.200 lakhs Rating agency charged fees 75% with a ceiling of Rs.30,000/-
Rs.200 lakhs+ Rating agency charged fees – 75% with a ceiling of Rs.40,000/-

Other Benefits

1. MSE buyers not paying on time to the vendors in case of buying the goods and services can also get the benefit. The maximum time limit to make the payment in case the same is not mentioned in the agreement is 45 days. The buyer will have to make the payment within these 45 days or else the compound interest charged is 3X on the unpaid amount as per the RBI notification

2. Banks are bound to provide subsidized loans to the MSEs with low-interest rates.

3. Such enterprises can avail of major tax benefits provided by the Income Tax and Goods & Service Tax (GST) by way of concessions and rebates.

4. Credit rating has a significant role to play, and MSEs have easy access to the credit.

5. Enterprises hold the right to manufacture the products.

6. Applying for patents and trademark registration in India enables them to avail concessions and rebates.

7. There is also constant support that MSEs enjoy from state and central government.

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