In most economies, Micro, Small and Medium Enterprises (MSMEs) are the driving force for economic growth. Recognising the importance of MSMEs and Small Scale Industries (SSIs), the government of India has provided special benefits and schemes for these businesses. In order to be eligible for availing these benefits, a business should register itself as MSME/ SSI enterprise under the Micro, Small and Medium Enterprises Development (MSMED) Act.

While registering under the MSMED Act is not mandatory, the following is a list of advantages for MSME/SSI registration in India:

1. Collateral-free loans from banks

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS) was launched by the government of India to make collateral-free credit available to the MSME sector. Both existing and new enterprises are eligible to be covered under the scheme. The Ministry of Micro, Small & Medium Enterprises, Government of India and Small Industries Development Bank of India (SIDBI), established a trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the CGS.

2. A hefty 50% subsidy on patent registration

Enterprises that have MSME Registration Certificate can avail 50% subsidy for patent registration at the time of application to the respective ministry.

3. 1% exemption on interest rate on overdraft

Enterprises that have MSME registration can avail benefit of 1% exemption on interest rate on overdraft as mentioned in the scheme (this is bank dependent).

4. Eligible for Industrial Promotion Subsidy

Enterprises that have MSME registration are eligible for the Industrial Promotion Subsidy as may be prescribed by the government in this regard.

5. Protection against delayed payments

The Ministry of Micro, Small & Medium Enterprises gives protection to MSME registered businesses against delay in payments from buyers and the right of interest on delayed payments, through conciliation and arbitration and settlement of disputes in minimum time. If any micro or small enterprise that has MSME registration, supplies any goods or services, then the buyer is required to make payment on or before the date agreed upon between the buyer and the micro or small enterprise. In case there is no payment date on the agreement, then the buyer is required to make payment within 15 days of acceptance of goods or services. Further, in any case, a payment due to a micro or small enterprise cannot exceed 45 days from the day of acceptance or the day of deemed acceptance. In case of failure by the buyer to make payment on time, the buyer is required to pay compound interest with monthly interest rests to the supplier on that amount from the agreed date of payment or 15 days of acceptance of goods or service. The penal interest chargeable for delayed payment to a MSME enterprise is three times the bank rate notified by the Reserve Bank of India (RBI).

6. Concession in electricity bills

Enterprises that have MSME registration certificate can avail concession on electricity bill by making an application to the electricity department along with MSME registration certificate.

7. Reimbursement of ISO certification charges

Enterprises that have MSME registration certificate can claim reimbursement of ISO Certification expenses by applying to the respective authority.

To explore business opportunities, link with me by clicking on the 'Invite' button on my eBiz Card.

Image credit: Shutterstock

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views, official policy or position of GlobalLinker.