If you are an entrepreneur or a small business owner looking for legal schemes to grow your business, then understanding the MSMED Act, 2006, is a must. This is the government initiative to promote, facilitate, and support MSMEs across the country. It is a legal framework that defines MSMEs, their registration process, and various benefits granted to them.
This article will guide you on everything about the MSMED Act, 2006, including the entities covered under this, its purpose, and amendments.
What Is the MSMED Act, 2006?
The MSME Development Act is the legal measure taken by the government of India to support the growth of MSMEs. This act promotes competitiveness and smooth operations among micro, small, and medium enterprises. There are various categories of MSMEs along with their rights defined under this act, and also ensure the timely payment by buyers.
How To Get Registered Under The MSMED Act, 2006?
To register under the MSME Act, 2006, here are the following steps you need to follow:
Visit The Authentic Portal
Go to the designated Udyam registration site: https://udyamregistration.gov.in. This is the governmental web link for the MSME registration.
Select Registration Type
Indicate whether or not you are a new entrepreneur or whether you previously registered via Udyog Aadhaar or EM-II and are willing to transition to the new registration process.
Submit Aadhaar Information
Provide the Aadhaar details of either the proprietor or the managing partner. However, if registering as a Company or LLP, use the Aadhaar of the authorized signatory.
Complete Business Details
To register under the MSMED Act, 2006, you will be asked to provide your business name, ownership status, business type, PAN number, address, banking details, and activity (manufacturing/service).
Complete Investment and Turnover
You will be asked to enter values for how much money you have invested in your plant and machinery/equipment and your annual turnover to classify your business into an MSME category (micro, small, or medium).
Submission and OTP Authentication
An OTP will be sent to your registered mobile number (linked to Aadhar) for verification. Before submitting your application, you will be asked to authenticate your application by entering the OTP, after which the application will be submitted.
Generate your Udyam Registration Certificate
Once you submit your application, you will get your Udyam Registration Certificate, which enables you to generate your Unique Udyam Registration Number (URN), which is the legal proof of MSME registration in the MSMED Act 2006.
Who Is Covered Under The MSMED Act?
MSMED Act, 2006, covers both manufacturing and service enterprises. The following are the businesses that fall under this Act, 2006, as mentioned below:
- Sole proprietorship
- Individual, business owner
- Partnerships firms
- Limited liability partnerships
- Private and public limited companies
- Co-operative societies
- Self-help groups
- Trusts
- Government corporations
- Any other company
What Is The Main Purpose Of MSMED Act?
The main aim of the MSMED Act 2006 is to promote, develop, and improve the competitiveness of the MSMEs. However, there are the following broad objectives:
- Promote, Develop, and Improve Competitiveness: One of the objectives of the Act is to empower the MSMEs by reinvesting the available resources for development and growth.
- Establish a Legal Framework: Clearly, the Act establishes a single predictable legal framework under which Micro, Small, and Medium Enterprises may obtain recognition and a designation that recognizes the enterprise investment value.
- Payment Clauses: There are several provisions for Micro, Small, and Medium Enterprises, where the MSMED Act protects small businesses from late payments, insolvency, and financially protect the enterprise.
- Definitions and Classification: The MSMED Act provides definitions and criteria (investment and turnover) for the Public Policy benefits when identifying those enterprises that are micro, small, and medium.
- Promote Entrepreneurship: The Act promotes self-employment and entrepreneurship, focusing on rural/semi-urban areas, and creates economic development and opportunities.
MSMED Act, 2006, Latest Amendments
In the past years, there have been various amendments in the MSMED Act, 2006, such as:
- Furnishing of Information Rules (2022): Amendments in 2022 established a more transparent process for MSMEs to enter information and develop accurate information to assist in developing policies and support for MSMEs.
- Retention of Non-Tax Benefits (2022): An entity that moves into a new MSME category can retain the benefit of non-tax benefits of the previous MSME category for three years after the date of reclassification
- Change in Classification Criteria (2020): As of July 2020, MSMEs reclassified regarding turnover and investment attest to a greater level of fairness between manufacturing and service MSMEs as public policy develops.
- Section 43B(h) – Link to Income Tax (2023): The new provision creates a requirement for the buyer to pay the MSME within 15 or 45 days, or they can not deduct it for income tax purposes as a business expense, leading to more timely payment to MSMEs.
- Proposed Changes (2024-25): The government is proposing to increase the limits on MSME investment and turnover in April 2025 and will also enact timing resolution methods for disputes and payments to be made more quickly.
How Udyamita Helpline Can Help With Registration Under The MSMED Act, 2006?
The Udyamita Helpline is here to make it easier for micro, small, and medium enterprises (MSMEs) created under the MSMED Act, 2006, to get help and professional service at every step.
- Assist you in the Udyam Registration process on the government website.
- Provide help with your data entry and document preparation.
- Help you determine the appropriate MSME category (micro, small, medium).
- Register yourself accurately and on time.
- To support you after registration, updating information, and accessing other MSME benefits.
- Support you in obtaining information on government schemes, loans, and subsidies under the Act.
For more information, you can connect with us through the Udyamita Helpline LinkedIn page or send us mail at advisor@udyamitahelpline.com.
Conclusion
The MSMED Act, 2006, is a significant framework for the promotion and protection of Micro, Small, and Medium Enterprises (MSMEs) throughout India. The Act provides a definition and explicates the classifications of enterprises, remedies for delayed payments, and a variety of other benefits available for registered businesses. For instance, those businesses that register under the Act would potentially have access to a range of government schemes, just to name a few potential benefits. Registration under the Act and following the guidelines could potentially provide entrepreneurs with support and legal protections, access to capital to support their growth in a modern economy.
FAQs
Is MSME Registration Mandatory?
MSME registration is not mandatory, but it is highly recommended as it allows businesses to access various government benefits, subsidies, and protection under the Act.
How long does MSME registration take?
Registration under the MSMED Act through the Udyam portal usually takes just a few minutes after completing the online form and Aadhaar verification.
