The Key benefits of MSME Certification

MSME represents micro, small and medium enterprises, and are an important aspect of Indian economy. Indian government provides many benefits for small-scale enterprises. These schemes can be availed through the MSMED act.

MSME signify Micro, Small and medium enterprises it is the pillar of economic growth in a developing country like India. MSME sector form 8% of our nations GDP.

MSME sector requires less investment and create enormous employment opportunities for the growth of the economy. This sector of the financial economy is still facing problems, i.e. lack of flow of institutional credit, proper connectivity of the companies from the market and many infrastructural issues as well.

Benefits from Banks

All banks and other financial institutions recognise MSMEs and have created special schemes for them. This usually includes priority sector lending, which means that the likelihood of your business being sanctioned a loan is high and lower bank interest rates.

The Financial exclusion of MSME sector made it imperative for all the banks whether public sector or private sector to implement schemes to include them within the fold of the banking sector.

Tax Benefits

The easiest way of reinforcing SME is to provide them with benefits which are tax related. Depending on your business, you may enjoy various tax benefits. The presentation of budget by the government made their intention towards SME sector clear.

  • More or less 96% of companies have benefited from the reduction in corporate tax rates for domestic companies. The tax rate has been reduced up to 5%, i.e. it is now 25% instead of 30%. This tax benefit is available to only those companies which have a turnover of 50 crores in the year 2015-16.
  • The timeframe for the minimum alternative tax has been increased to 15 years from the previous time frame which was only 10 years; this has reduced the tax liability of various companies in future.
  • The presumptive tax has been reduced by 2% for companies which have a turnover of 2 crores.

These MSME benefits will leave investable resources with many firms and hence they can spend more on research and development.

Excise Exemption Scheme

Central Excise Act provides an exemption to the small-scale industry in respect to a specified commodity. This exemption was introduced in 1985; this is a consistent policy which is employed by the government of India.

Small-scale Industry which was eligible for exemption under the act was industry whose value of turnover did not exceed 1.5 crores on the first day in the financial year.

Post GST, the exemption limit has been decreased to Rs 20 lakh and 10 lakh in special category states. Hence from the date, GST came into force Excise exemption seize to exist.

Related: Documents Required for MSME Registration

The implication of GST on MSME

Goods and Services Tax (GST) is a significant tax change brought in the Indian economy, and this tax regime is expected to deliver a paradigm shift in the Indian economy. GST was introduced because it is a comprehensive taxation procedure which is levied by central and state government.

GST applies to most of the economic activities whether it is trade, commerce, manufacturing or profession. Though there is an exception regarding people, who are engaged in agricultural business.

GST has helped to solve MSME two significant problems:

  1. Access to finance
  2. Enforcement of financial discipline

GST has affected MSME sector the most; the rollout has many positive, adverse impacts. The tax neutrality is one of the most prominent features which impacts the MSME sector the most.

Benefits from State Governments

Most states offer to enterprises who’ve registered under the MSMED Act. They are provided with subsidies on power, taxes and entry to SEZ’s.

Benefits from Central Government

The central government of India announces schemes to benefit medium and small enterprises, such as the credit guarantee scheme, Micro & Small Enterprises Cluster Development Programme (MSE-CDP) and ISO 9000/ISO 14001 Certification Reimbursement.

Related: Benefits of Udyog Aadhar Registration in India

Credit Guarantee Scheme (CGTMSE)

The Ministry of Micro Small and Medium enterprise has established a trust for the companies named Credit Guarantee Fund trust for micro and small enterprises (CGTMSE). This scheme was launched in the year 2000 on 30th August.

Ministry of Micro and Small Enterprise with the help of the government of India has started providing collateral free loans or credit to MSME sector. The government launched this scheme because MSME registration was dealing with the problem of non-availability of timely credit from the banks as banks considered giving loans to small-scale industry a risk.

The Credit Guarantee scheme, introduced to support MSME, comes with modifications to make it more beneficial for small traders:

1.    Enhancing the eligibility for the loan from Rs. 25 lakh to Rs. 50 lakh.

2.     Reducing the one-time guarantee for loans availed of by the MSME in the North-Eastern region from 1.5% to 0.75%.

3.     Increasing the extent of guarantee cover from 75% to 80%

4.     Women entrepreneurship is promoted

5.     Micro enterprises, for loans up to 5 lakhs

Specific terms and Condition have to be followed by the MSME to be eligible for this scheme is:

•    The rate of subsidy provided for the MSME under the scheme is 15%

•    The upper limit for the loan provided under this scheme is 1 crore

•    NABARD and SIDBI are the agencies that are eligible for the scheme

Micro & Small Enterprises Cluster Development Programme (MSE-CDP)

Ministry of Micro, Small and Medium Enterprises, Government of India has adopted strategy for enhancing productivity and competitiveness as well as capacity building of Micro and Small Enterprises (MSEs). Clustering of units also enables providers of various services to them, including banks and credit agencies, to provide their services more economically, thus reducing costs and improving the availability of services for these enterprises. The assistance to the company is provided on the following aspects.

  • Diagnostic study
  • Soft intervention
  • Infrastructure development

ISO 9000/ISO 14001 Certification Reimbursements

The scheme provides an incentive to those small scale/ancillary undertaking which has acquired ISO 9000/ISO 14001 certifications. The scheme enlarged to include reimbursement of expenses for acquiring ISO 14001 certification.

The scheme envisages reimbursement of charges of acquiring ISO9000/ISO-14001 certifications to the extent of 75% of expenditure subject to a maximum of Rs.75, 000 in each case.

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