Intricacies and Nuances of SSI and MSME Formation
Starting a business under small scale industries can be a smart decision. Many schemes and plans of the Central Government and state governments are aimed at strengthening these types of companies. The availability of information has ensured that people become aware of the pros and cons of treading on this path. SSI registration and MSME registration must be done as per the statutes governing their creation and operation.
The state of registration is vital
The creation of an SSI or MSME business is always governed by the guidelines created by the MSME ministry of the Government of India. However, various state governments have the power to bring some changes in the processes and methodology. As a result, the state in which you want to start your business becomes crucial in the overall scheme of things. Finding out about all the relevant rules also becomes essential.
In some states, the city corporations and councils bear the responsibility for providing centrally sponsored subsidies and incentives to businesses. This step has been taken to ensure that SSI and MSME companies don’t face significant problems in utilizing the benefits. Accessing the local government is relatively easy. As a result, entrepreneurs can make applications to get the benefits associated with various schemes.
Service providers versus manufacturing units
The total investment made in business determines its eligibility to be considered for SSI registration. However, the slabs for service providers and manufacturers of goods are different. If your company is providing services, then the total investment must not exceed Rs. Ten lacs for it to be categorized as a micro-industry. On the other hand, manufacturing units with investments up to Rs. 25 lacs can be classified as a micro-unit business.
Service providers with investments between Rs. 10 lacs and Rs. 2 crores can apply for SSI registration as a small-unit. For manufacturing-based companies, this slab ranges from Rs. 25 lacs to Rs. 5 crores.
SSI registration can also be availed under medium enterprises. Service providers with total investment up to Rs. 5 crores and manufacturers with seed capital up to Rs. 10 crores can get the SSI registration under this category.
Central Government schemes such as Micro Units Development and Refinance Agency (MUDRA) have proven to be a godsend for the MSME sector. The Rs. 1000 crore corpus set up in 2014 has been instrumental in creating entrepreneurs in various parts of the country.
SSIs and MSMEs can also avail loans at reduced rates from Public Sector Banks (PSBs). Some private sector banks have also understood the importance of lending to these sectors. So, they have brought down their interest rates to provide loans to entrepreneurs in the MSME sector.
Registering your business as SSI or MSME will also give you several tax benefits. Income tax exemptions for five years after starting an SSI business have been put in place by the central government. The primary aim behind this move is to make sure that entrepreneurs don’t stop their operations in the early stages.
Online is easy
The best thing about technology is that it makes people’s lives easier. Online portals for SSI incorporation have made the entire process seamless and hassle-free. Priority sector lending by Public Sector Banks can be availed with the provisional registrations as an SSI or MSME. You must remember that applying for a temporary certificate is the first part of the process. You can’t obtain a permanent SSI certificate unless you get a temporary registration.
Arranging for working capital is among the primary concerns of most startups in India. A PRC as an SSI or MSME will be the ideal way to make sure that you do not fall short. The validity of provisional registration is never more than five years.
Entrepreneurs and startups must know that availing tax benefits will not be possible without a permanent registration. So, as soon as you get your business up and running, you must apply for permanent record. Some of you might be surprised to find out that the raw materials needed in manufacturing goods are also available to MSMEs at a concessional rate. However, getting all the mandatory permits and licenses pertaining to your sector of manufacturing is crucial. You can’t avail these benefits if you don’t have the necessary clearances.