ANALYSIS: MSME – INDIA BENEFITS FOR SMALL AND MEDIUM ENTERPRISES – BENEFITS AND REGISTRATION

MSME – BENEFITS AND REGISTRATION

I. What is MSME?
As the abbreviation suggests, MSMEs are Micro-Small & Medium Enterprises. MSMEs fall under the Ministry of Micro, Small and Medium Enterprises.
You must be registered to take advantage of the benefits of the MSMED Development Act.

MSMEs are classified into two categories: manufacturing and service enterprises.

II. Eligibility for MSME Registration (for manufacturers and service providers, i.e., not for merchants):

Criteria:
Investment and annual turnover
Classification Micro Small Medium
Production
Services

Investment < INR 1
Crore (EUR 125,000)
and turnover < INR 5
Crore (EUR 625,000)

Investment < INR 10
Crore (EUR 1,250,000 e
Turnover < INR 50 Crore
(6,250,000 EUR)

Investment < INR 20
Crore (2,500,000) and
Turnover < INR 100
Crore (EUR 12,500,000)

The following are some of the benefits of obtaining registration as an MSME in India:

1. Bank loans (without collateral)
   The Indian government has made collateral-free credit available to all small and micro
   Business sectors.
   This initiative guarantees funds to micro and small enterprises in the sector.
   Under this scheme, both old and new enterprises can claim benefits.
   The scheme, named ‘The Credit Guarantee Trust Fund Scheme,’ was introduced by the Indian government as a credit guarantee system for all micro and small enterprises.
2. Grants for patent registration
   A 50% grant is awarded to companies that have a certificate of registration issued by the MSME.
   This subsidy can be used for patent registration by filing an application with the respective ministry offices.
3. Overdraft exemption
   Businesses registered under the MSME program are eligible for an 1% benefit on financing projects, as outlined in a schedule that varies from bank to bank.
4. Eligibility for the industrial promotion subsidy
   Enterprises registered under MSME are also eligible for an industrial promotion subsidy.
5. Protection against late payments
   Sometimes MSME clients tend to delay payments.
   The Ministry of Micro, Small and Medium Enterprises helps businesses by giving them the right to collect late payment interest on payments received late.
   The resolution of such disputes must occur in a minimal timeframe through conciliation and arbitration.

In the event that an MSME-registered enterprise provides goods or services to a buyer,
The buyer is required to make the payment on the agreed-upon payment date, in advance of it, or within 15 days of the date the products or services were approved if no payment date is mentioned in the contract. .

If the buyer delays payment for more than 45 days after approval,
The buyer must pay compound interest and monthly interest on the agreed-upon amount.
The applicable interest rate is three times the rate set by the Reserve Bank of India.

1. Reducing electricity bills
   This grant is available to all businesses with MSME registration.
   The right to a reduction is certified by providing a request to the electricity department along with the MSME registration certificate.
2. Refund of fees on ISO certifications
   Registered MSME enterprises can apply for reimbursement of expenses incurred for ISO certifications.

In addition to the above, the Indian Finance Minister announced the following liquidity measures for MSMEs from Wednesday, May 13, 2020:

The Rs 3 lakh crore (37.5 billion euro) unsecured automatic loan will be
provided to enterprises that are part of MSMEs.
Borrowers with a maximum of Rs 25 crore (€3.1 million) outstanding
and a turnover of Rs 100 crore (12.5 million euros) are eligible.
Banks may provide businesses with an emergency line of credit up to 20% of the total outstanding credit as of February 29, 2020.

These loans will have a 4-year term and a 12-month moratorium on repayment principal.
There will be a credit guarantee under the 100% scheme for banks and NBFCs, covering both principal and interest. This scheme is available until October 31, 2020.

To provide equity support to struggling SMEs, the Government will also facilitate the setting aside of INR 20,000 crore (EUR 2.5 billion) as subordinated debt.
For subordinated debt for distressed SMEs, the SME promoters will be indebted to the banks, who will then be fully reimbursed by the promoter as equity. .

There is also a Rs 50,000 crore or 6.25 billion euro infusion of capital for MSMEs through a ‘Fund of Funds’, to be managed through a master fund and a limited number of feeder funds.
This will help expand the size and capacity of MSMEs and will also encourage small and medium-sized enterprises to be listed on stock exchanges.

III. Evaluation points :

Before requesting MSME registration, a company should consider the type of its customers.
Some large enterprises operate with long credit periods, (60- or 90-day payments)
Therefore, this tax regime may not be suitable for engaging with a supplier registered under the MSME regime because the company would be paid on a 45-day basis.
Therefore, the relative competitiveness of MSME-regulated companies compared to similar companies with different tax regimes could decrease.

How can Octagona be useful to you?

Octagona, as a knowledge partner of the Indian Embassy in Italy,
is available to connect you and support you in defining your joint venture and developing your business in India.

You can contact Mr. Brando Bruschi: [email protected]

We remind you that the Octagona Task Force, in its capacity as Knowledge Partner of the Indian Embassy, is available to provide free support, detailed information, and advice to all Italian companies that may require it.

Regarding this matter, you can contact:

Alexander Fichera | [email protected] | +39.328.2123458
Monica Sessi | [email protected] | +39.340.3422473
Brando Bruschi | [email protected] | +39.348.9653664