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MSMED Act 2006

Registration under MSMED Act, 2006







The registration under Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 is for facilitating the promotion and development and enhancing the competitiveness of Micro, Small and Medium enterprises.






What are Micro, Small and Medium enterprises?






The following slabs have been prescribed under the MSMED Act to determine the status of the Enterprise:




No. Type of Enterprise Manufacturing Industry


(Investment in Plant and Machinery)


Service Industry


(Investment in Equipments)


1 Micro


Does not exceed Rs. 25 Lakh Does not exceed Rs. 10 Lakh


2 Small


Exceeds Rs. 25 Lakh but does not exceed Rs. 5 Crore Exceeds Rs. 10 Lakh but does not exceed Rs. 2 Crore


3 Medium Exceeds Rs. 5 Crore but does not exceed Rs. 10 Crore Exceeds Rs. 2 Crore but does not exceed Rs. 5 Crore










Which are the classes of enterprises that may qualify for Reistration?






All classes of enterprises, whether Proprietorship, Hindu undivided family, Association of persons, Co-operative society, Partnership firm, Company or Undertaking, by whatever name called can apply for the registration and get qualified for the benefits provided under the Act.






Whether the Registration is mandatory/compulsory?






A Medium enterprise engaged in the manufacture or production of goods has to compulsorily register under the MSMED Act. For other Enterprises the registration is discretionary or optional.


Taking into consideration the benefits available under the Act, it is recommended that every enterprise shall opt for the registration.














Benefits available under the MSMED Act






Registration of Micro, Small and Medium (MSM) Enterprises under MSMED Act is a very powerful medium to enjoy the benefits available to such firms:






Micro and Small Enterprises:
1. Easy finance availability from Banks, without collateral requirement
2. Protection against delay in payment from Buyers and right of interest on delayed payment
3. Preference in procuring Government tenders,
4. Stamp duty and Octroi benefits,
5. Concession in electricity bills
6. Reservation policies to manufacturing / production sector enterprises
7. Time-bound resolution of disputes with Buyers through conciliation and arbitration
8. Reimbursement of ISO Certification Expenses




Medium Enterprises:
1. Easy finance availability from Banks, without collateral requirement
2. Preference in procuring Government tenders
3. Reservation policies to manufacturing / production sector enterprises
4. Time-bound resolution of disputes with Buyers through conciliation and arbitration






Obligations for the buyers availing services or goods from MSM Enterprises






























































The Buyers have to ensure whether those suppliers of goods and services are under the purview of MSMED Act i.e. the Buyers have to confirm the registration of the suppliers under the MSMED Act.






The Buyer should ensure the payment before the end of credit period decided else the interest would be payable.






In case of disputes, application to Micro and Small Enterprises Facilitation Council (MSEFC) would trigger the conciliation and arbitration process. Once the application is done under MSEFC, there is no provision to withdraw the proceedings. Therefore, the Buyer should ensure the best ways to resolve the disputes, if any, instead approaching to MSEFC in the initial stages of dispute.






The Buyers need to ensure that the Buyer does not owe any outstanding amount including interest due to MSM Enterprises for more than 15 days. Otherwise, the Buyer needs to disclose this non-payment in the Annual Financials of the Buyer.










Benefits/Safeguards to Micro and Small Enterprises in case of delayed payment by






Payment of interest


The Act provides for the payment of compound interest at 3 times the Bank Rate by the Buyer in case of failure to make the payment with in maximum of 45 days from the date of receipt of goods or services.






Disclosure of delayed payment in audited accounts






Where any buyer is required to get his annual accounts audited under any law for the time being in force, such buyer shall furnish the following additional information in his annual statement of accounts, namely: -




























• The principal amount and the interest due thereon (to be shown separately) remaining unpaid to any supplier (micro or small enterprise) as at the end of each accounting year;






The amount of interest paid by the buyer along with the amounts of the payment made to the supplier beyond the appointed day during each accounting year;






The amount of interest due and payable for the period of delay in making payment (‘payment’ here means the payment which have been made but beyond the appointed day during the year and without adding the interest thereon specified under this Act for the period of delay);














Disallowance of interest under Income Tax Act, 1961


According to the Income Tax Act, 1961 the amount of interest payable or paid by any buyer, for delayed payments to Micro and Small Enterprises shall not be allowed as deduction for the purpose of computation income under the Income Tax Act, 1961.






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