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  • Writer's pictureJasaro In

Why the Startups must register themselves as MSMEs with immediate effect?

The Micro, Small and Medium Enterprises or MSME sector accounts for about 45% of manufacturing output, 95% of the industrial units, 40% of exports but most importantly they also account for nearly 30% of the national GDP. The MSME sector employs almost 60 million people, predominantly in the rural areas of the country, thereby making it the largest source of employment after the agriculture sector. Hence, the development of this sector holds the key to inclusive growth and plays a critical role in India’s future development.

The MSME sector considered to be the backbone of India's economy had been immensely rattled amid the severe decline of economic slowdown, owing to the Covid19 pandemic. And the much-awaited economic package recently announced under the PM Modi's "Atmanirbhar Bharat Abhiyan" scheme, is expected to help at least 45 lakh MSMEs to resume their halted operations.

Are Startups feeling neglected?

For over 10 years, India's startup ecosystem has matured to become the world's 3rd largest startup hub, followed by the US and China. It's sad to see that the Startups haven't yet received any separate relief or support from the government, during the lockdown.

Owing to the recent Covid19 pandemic, the cash flow situation for startups currently is at its lowest levels. According to the survey recently conducted by Nasscom, a whopping 70% of Indian Startups may burn out within 3-months, and the rest 22% of startups have barely enough cash reserves to make it by the end of 2020.

Wait, Startups can avail benefits too!

Startups are not aware that the benefits and various initiatives offered to the MSMEs by the Government, can also be availed by them!

Finance Minister Nirmala Sitharaman has clarified that #Startups can be eligible for MSMEs relief measures announced under the Atmanirbhar Bharat Abhiyan scheme, but to avail its benefits, they need to first register as MSMEs on the Udyog Aadhaar Gov In portal.

The government has even changed the definition of MSMEs to include businesses with up to Rs. 100 crore of turnover and Rs. 20 crore of investment in machinery and equipment. As a result, 99% of Startups can now qualify to avail of these benefits.

Most of the #AngelInvestors and #VC firms are insisting (rather pushing) their portfolio of startup companies to urgently get themselves registered as MSME, and avail the benefits.

As a #bootstrapped Startup, if you haven't yet registered as MSME, you must do so ASAP!

Benefits for the MSMEs under Atmanirbhar Bharat Abhiyan Scheme:

Collateral free loans up to Rs 3 Lakh Crores: The 100% credit guarantee of 3 lakh crore by the government, which covers both principal and interest is the key highlight of the government’s relief package. This provision will rescue MSMEs that need additional funding to meet operational liabilities and restart operations, thereby helping them survive the economic slowdown. The loans, however, should be taken before October 31, 2020, will have a four-year tenure and moratorium of 12 months.

Rs. 20,000 Crores Subordinate debt for NPA/Stressed MSMEs: The government has set aside 20,000 crore as subordinate debt to help those MSMEs with stressed accounts or non-performing assets (NPA). Under this scheme, promoters of the MSME will be given debt, which will then be infused as equity in the unit.

Rs. 50,000 Crores Fund of Funds: The government has also created a separate corpus for MSMEs with growth potential and viability. The objective of this fund is to infuse equity to help MSMEs expand and grow.

MSME Samadhaan or Clearing of Pending Dues: It's now mandatory for the Central Government ministries and departments, state governments, and public sector to clear the pending dues of MSMEs within 45 days, thereby greatly easing their working capital situation. As on March 31, 2020, the total outstanding payments to MSME units were estimated to be over 4.95 lakh crore.

Other Benefits for being an MSME

Global tenders have been disallowed up to Rs. 200 crores: It means that all orders below Rs. 200 Crores will go to domestic companies and this would immensely help the MSMEs in particular. So, the MSME registration might also help you in getting government tenders. There are many government tenders, which are only open to the MSMEs.

Reduced Interest Rates, Easy Access to Credit with Priority Lending: All banks have been specifically instructed to offer loans to MSME at lower interest rates than the usual rates. RBI has certain earmarked funds that have to mandatorily be given to MSME businesses. Producing MSME certificate benefits to entitle one to avail of this loan on a priority basis with fewer hassles.

Income Tax Exemptions: There are various tax rebates offered to the MSMEs.

Reimbursement on ISO Certification Expenditure and Patents: MSMEs can avail of an exemption of all expenses incurred for obtaining ISO 9000, ISO 14001, and HACCP certifications. Even the costs borne by MSME for patents is reimbursed.

MSMEs are given higher preference for a government license, approvals and registrations or certification, irrespective of the field of business.

Help in Export Promotions: The Government of India organizes several exchange programs, craft fairs, exhibitions, and trade-related events internationally. MSMEs are given access to all such platforms, besides the Government also incentivizes the export of goods and services by MSMEs through subsidies, tax exemption, and technical support.

Capital and other grants for infrastructure development: Government also gives capital grants to MSMEs for the improvisation of the infrastructure and support for their entrepreneurial development. To enhance the cost-effectiveness and promote clean energy use in manufacturing, the government reimburses the project costs incurred by MSMEs for the implementation of clean technology, preparation of audit reports, and subsidies for licensing products, according to national and international standards.

Online MSME Registration Process

Udyog Aadhaar is a 12-digit Unique Identification Number provided by the Ministry of MSME, Government of India. It is also known as Aadhaar for Business.

MSME Registration process is fully online and it's absolutely free (beware of frauds, who charge you anywhere from Rs. 200 - Rs. 1,800)

Visit for more details on MSME registration.

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