MSME Registration Now Open to Traders: Benefits and Impact

The Udyam Registration, commonly known as MSME registration, is now accessible for traders. According to the government, individuals involved in retail or wholesale trading can now register and enjoy the benefits available to other registered entities under the MSME scheme. This article aims to provide comprehensive details about MSME registration for traders.

Official Announcement and Impact

As of July 2, 2021, the Government of India has expanded the classification of Micro, Small, and Medium Enterprises (MSMEs) to include wholesale and retail traders. These traders now qualify for priority sector lending provided by banks and other financial institutions according to the Reserve Bank of India’s guidelines. This development is particularly beneficial for participants in the retail and wholesale trade, including those involved in the repair of four-wheelers and motorcycles.

Impact on Smaller Wholesalers and Retailers

The decision to extend MSME registration to traders has positively impacted smaller retailers and wholesalers with turnovers of up to Rs 250 crore. It enables them to access prompt credit through various schemes introduced under the Atmanirbhar Bharat initiative. The RBI circular released in July authorizes enterprises with Udyog Aadhaar Memorandum under the specified three NIC codes to transition to the Udyam Registration Portal. UAM is a concise, one-page application form for registration, using a self-declaration format. This format allows MSMEs to affirm their existence, provide bank account details, Aadhaar information of the promoter, and other essential particulars.

Documents Required for MSME Registration

1. Aadhar Number: The Aadhar number of the business owner or authorized signatory is a mandatory document for MSME registration. It serves as a primary identity proof.
2. PAN Number: The Permanent Account Number (PAN) of the business or the individual applying for registration is essential for tax-related identification and compliance.
3. Address of the Business: Accurate details of the business address are required. This includes any proof of the business premises, such as utility bills or rental agreements.
4. Bank Account Number: The bank account number, along with the IFSC code, is necessary to facilitate financial transactions and for the disbursement of any financial aid or subsidies.
5. The Basic Business Activity: A clear description of the primary business activity must be provided. This helps classify the business under the appropriate category for MSME benefits.
6. NIC 2 Digit Code: The National Industrial Classification (NIC) code is used to classify the type of business activity. The correct 2-digit code must be included in the application.
7. Investment Details: Information regarding the investment in plant and machinery or equipment is required. This helps determine the category of the MSME (Micro, Small, or Medium).
8. Turnover Details: As per the new MSME definition, turnover details must be provided. This includes annual turnover figures to verify the business’s eligibility under the MSME criteria.
9. Partnership Deed: For businesses operating as partnerships, a copy of the partnership deed must be submitted. This document outlines the roles and responsibilities of each partner.
10. Sales and Purchase Bill Copies: Copies of sales and purchase bills are required to validate the business transactions and operational status.
11. Copies of Licenses and Bills of Purchased Machinery: Any relevant licenses and bills for machinery purchased for the business should be provided. 

How to Apply for MSME Registration on Udyam Registration

To avail the benefits announced by the Government for MSMEs, businesses need to register on the ‘Udyog Aadhaar Memorandum (UAM) portal’. The registration process is simple and free for every user. Follow these steps to register your business online:

Step 1: Visit the Udyam Registration Website

Begin by visiting the Udyam Registration Portal. You will be required to fill out a form on this website. If you are registering your business as an MSME for the first time, click on the first link on the page that directs you to the registration form.

Step 2: Enter Aadhar Number and Validate Your Identity

Enter your Aadhar Number and Name in the respective fields and click on ‘Validate & Generate OTP’. You will receive an OTP on your registered mobile number, which you need to enter to verify your identity.

Step 3: Enter PAN Details

After your identity is verified, you will need to fill in your PAN details. If you do not have a PAN card yet, you can select the ‘No’ option. This step ensures that your business details are accurately recorded.

Step 4: Fill the Udyam Registration Form

Next, you will need to fill out the Udyam Registration form, which includes fields numbered 5-24. This form requires information about your business, including its type, address, bank details, and other relevant information.

Step 5: Validate with OTP and Submit the Form

Once the form is completed, an OTP request will be sent to your phone again. Enter the OTP along with the verification code to submit the form successfully. After submission, a “Thank You” message will appear along with a Registration Number. Keep this number handy for future reference.

The application process typically takes 2-3 days for approval and registration to complete. Once the application is approved, the registration is done, and the MSME certificate will be delivered to you via email. 

Please note that the MSME registration on the government portal is free of cost. This registration not only formalizes your business but also opens up a range of benefits, including access to government schemes, subsidies, and easier access to credit.

Also read: Indian Retail Market: Poised for Unprecedented Growth

Benefits of MSME Registration for Traders

MSME registration offers a range of benefits to registered businesses and traders, providing vital support and incentives to bolster their operations and growth. Here are some key benefits:

1. Availability of Collateral-Free Bank Loans

The Government of India has implemented substantial measures to facilitate access to collateral-free loans for small and micro-businesses. This endeavor simplifies the loan procurement process for small businesses, enabling them to bypass the hurdles associated with conventional institutions known for their rigorous loan disbursement policies. The Credit Guarantee Trust Fund Scheme, established by the GOI, Small Industries Development Bank of India, and the Ministry of MSME, plays a vital role in implementing this scheme and supporting financially aggrieved enterprises.

2. Cost Relaxation on Patent Registration

Entities registered under MSMEs are eligible for a 50% subsidy on their patent registration fees, as per the prevailing laws. This subsidy is a crucial incentive that encourages innovation among small businesses. It enables them to explore and develop new projects and technologies. To avail this subsidy, the entity must submit a prescribed application to the relevant ministries.

3. Overdraft Interest Rate Exemption

Through MSME registration, traders can benefit from a 1% reduction in the Overdraft Interest Rate through a scheme that varies based on the bank. This financial advantage empowers small entities to navigate unexpected financial crises more effectively.

4. Industrial Promotion Subsidy Eligibility

MSME registration for traders grants eligibility for subsidies related to Industrial Promotion, as provided by the Government of India.

5. Coverage Against Deferred Payment

The MSME sector often faces the challenge of delayed payments, leading to supply chain disruptions and financial difficulties. However, MSME registration provides protection to registered entities, allowing them to address this issue. The government penalizes defaulters who fail to make payments within 15 days or the agreed date from the business transaction. This is mandated by a Supreme Court judgement. Interest on delayed payments will be charged as per RBI norms.

6. Concessions on Electricity Bills

All MSME-registered entities have the opportunity to avail concessions on their electricity bills. This concession supports businesses in scaling up production rates and securing more orders from clients without being burdened by capital expenditures on maintenance and electricity. To access this benefit, the concerned MSME must submit a prescribed application to the state electricity department along with the registration certificate.

7. ISO Certification Charges Reimbursement

Any MSME-registered entity has the right to claim reimbursement for the expenses incurred in obtaining the ISO certification, further promoting quality standards and compliance within the sector.

MSME registration for traders is a vital tool, providing an avenue for formal recognition and several beneficial provisions. Through registration, traders gain access to financial support in the form of collateral-free loans and reduced overdraft interest rates, facilitating smoother financial operations.

Additionally, the registration offers cost savings, such as subsidies on patent registration fees and ISO certification charges reimbursement. The protective coverage against delayed payments ensures a more secure and stable business environment, addressing a common challenge in the trading sector. Overall, MSME registration empowers traders by enhancing their credibility, promoting growth, and fostering a conducive ecosystem for sustained success.