ANALYSIS : MSME - INDIA FACILITIES TO SMALL AND MEDIUM ENTERPRISES - BENEFITS AND REGISTRATION

MSME - BENEFITS AND REGISTRATION

I. What is MSME?
As the abbreviation suggests, MSMEs are the Micro-Small & Medium Enterprises MSMEs fall under the Ministry of Micro, Small and Medium Enterprises.
It is necessary to be registered to take advantage of the benefits of the MSMED development law.

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

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

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, called ‘’The Credit Guarantee Trust Fund Scheme,’’ was introduced by the Government of India 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 grant can be used for patent registration by applying to the respective ministry offices.
3. Overdraft exemption
   Enterprises registered under MSME are eligible for an 1% benefit on financing projects as shown in a scheme that differs from bank to bank.
4. Eligibility for industrial promotion grant
   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.
   Resolution of such disputes should be done in minimum time through conciliationand arbitration.

Where an enterprise registered by MSME provides goods or services to a buyer,
the buyer is obliged to make payment on the agreed payment date, in advance of the same, or within 15 days from the day on which the goods or services were approved if the payment date is not mentioned by contract .

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

1. Reducing electricity bills
   This concession is available to all Enterprises that have MSME Registration.
   Entitlement to the rebate is certified by providing an application to the Department of Electricity along with a certificate of registration from MSME.
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 Minister of Finance announced the following liquidity measures for the MSME from Wednesday, May 13, 2020:

The automatic unsecured loan worth Rs 3-lakh crore (37.5 billion euros) 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.
An emergency credit line can be provided by banks to Enterprises up to 20% of total credit outstanding as of 2/29/2020.

These loans will have a 4-year term and a 12-month moratorium on repayment principal.
There will be a credit guarantee at 100% in favor of Banks and NBFCs, on principal and interest. This scheme can be used until October 31, 2020.

To provide distressed SMEs with equity support, the government will also facilitate the provision of INR 20,000 crore (EUR 2.5 billion) as subordinated debt.
For iI subordinated debt for distressed SMEs, SME promoters will be indebted to banks, which will then be fully repaid by the promoter as equity .

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

III. Evaluation points :

Before applying for MSME registration, a company should keep in mind the type of its customers.
Some large enterprises operate with long credit periods, (60- or 90-day payments)
so this tax regime may not be suitable for engaging with a supplier registered under MSME because the business would be paid at 45 days.
Therefore, the relative competitiveness of MSME companies compared to similar companies with different tax regimes may be reduced.

How Octagona can be useful to you ?

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

You can contact Mr. Brando Bruschi: b.bruschi@octagona.com

As a reminder, the Octagona Task Force as Knowledge Partner of the Indian Embassy is available to provide free support, detailed information and advice to all Italian companies that may need it.

In this regard you can contact :

Alexander Fichera | a.fichera@octagona.com | +39.328.2123458
Monica Sessi | m.sessi@octagona.com | +39.340.3422473
Brando Bruschi | b.bruschi@octagona.com | +39.348.9653664