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Government Schemes Introduced To Boost MSME In 2021

msme schemes

The outbreak of COVID-19 caused chaos in industries and businesses, especially small and medium-sized enterprises (MSMEs). Several MSMEs were forced to close as a result of the pandemic, while others struggled with liquidity and loan access.

The government announced several MSME schemes in the Union Budget-2021 to support small businesses.

First, Let Us Clarify- What is an MSME?

Micro, Small, and Medium Enterprises (MSME) is a term that refers to businesses that are small and medium in size. The Micro, Small, and Medium Enterprises Development (MSMED) Act of 2006 divided the businesses into two categories.

  • Manufacturing enterprises- an individual who is engaged in any industry of manufacturing or producing.
  • Service enterprises-an individual who is engaged in the business of providing or rendering services.

Who is qualified to apply for MSME?

Any manufacturing or service-oriented business can apply to be classified as a micro, small, or medium business if it meets the following composite threshold limit:

Classification Micro Small Medium
Manufacturing and Services Investment <1cr and turnover <5cr Investment <10cr and turnover <50cr Investment <50cr and turnover <250cr

*Investment-When determining the amount of investment, the original value (purchase price) of Plant and Machinery or Equipment must be taken into account.

What is the process for registering?

According to the MSME schemes announcement dated on 26.06.2020, Udyam Registration is the new process of MSME/UDYOG AADHAAR registration initiated by the Ministry of Micro, Small, and Medium Enterprises effective from July 1, 2020.

What is the Udyam Registration?

The Udyam registration is the current registration process. The registration certificate can be acquired by the following business entities:

benefits of udyam registration

What are the benefits of registration under the Udyam Process?

  • Exemption of 1% interest rate on Overdraft
  • 100 percent collateral-free loans, simple mortgages, and lower-cost business loans (1.5 percent lower than interest on regular loans)
  • Subsidy for barcode registration
  • Concession for electricity bills
  • Exemption of stamp duty and registration fees
  • CLCSS (credit-linked capital subsidy scheme) is eligible to UDYAM registered entities.
  • ISO certification fees reimbursement
  • Exemption from direct taxation.
  • Receive NSIC and credit rating subsidies, as well as IPS subsidy eligibility.
  • Financial support is available for Patent registration.
  • For unpaid dues from customers, there is a recovery mechanism through MSME SAMADHAN.
  • Micro and small businesses will benefit from a Corporate guarantee scheme worth up to 200 lakhs

What are the advantages of registering in MSME?

  • MSMEs registered under GST can get a 2% interest grant from the government for incremental loans up to ₹1 crore under the MSME Credit Scheme. (Valid until March 31, 2021)
  • PSU banks have specialized SME branches that allow MSMEs to raise funds.
  • Only Indian companies (including MSMEs) will participate in a government tender worth up to ₹200 crores to support the “Make in India” initiative. This will put an end to competition from all over the world.
  • To improve liquidity and working capital management, government agencies will assist MSME receivables within 45 days.
  • The following measures have been created to make the Insolvency and Bankruptcy Code more user-friendly:-
  • – The minimum amount required to begin insolvency proceedings has been increased to ₹1 crore
  • – Suspension of new insolvency proceedings for up to one year
  • – COVID-19-related debt is excluded from the concept of “default” for purposes of initiating insolvency proceedings.
  • Business linkages on the internet to compensate for canceled trade fairs.
  • Various government schemes and subsidies to boost the MSME market, including the Zero defect Zero effect, incubation, women entrepreneurship, and others, to modernize the sector, increase product quality, and make it more competitive among its global peers.

What MSME schemes, incentives and reforms have the government proposed in the Union Budget for 2021?

  • 1. Financial incentives:
    To support the economy and MSMEs that have been seriously impacted by the COVID-19 outbreak:

    • The government has announced a budget allocation of ₹15,700 crores for the MSME market, which is more than double the 2020 Budgeted Expenditure.
    • To assist the pandemic-affected MSMEs, a larger budget has been allocated to the Prime Minister Employment Generation Programme (PMEGP) and Other Credit Support Scheme.
    • Customs duties on semis, flats, and long goods of non-alloy, alloy, and stainless steels (raw materials for some MSME businesses) have been lowered to 7.5 percent, allowing them to obtain raw materials at lower prices than would be available on the domestic market.
    • The exemption in customs duty on steel scrap is in place until March 31, 2022, to provide relief to metal recyclers, most of them are small businesses (MSMEs).
    • Anti-dumping duty (ADD) and Countervailing duty (CVD) on some steel products have also been removed.
    • Copper scrap duty has been lowered from 5% to 2.5 percent in order to provide relief to copper recyclers.
    • Custom duties on some finished goods manufactured by MSMEs firms, on the other hand, have been raised in order to revive the domestic apparel, leather, handicrafts, and finished synthetic gems industries. Steel screws and plastic builder’s goods will now be subject to a 15% duty increase, according to the minister.
  • The changes outlined above would assist the sector is recovering from the effects of COVID-19 and creating job opportunities. Small business recovery efforts have been made.
  • 2. Operational reforms:
    • The focus has been on MSME activity reforms that will boost confidence in MSME players such as:
    • A special structure for MSME will be added, with a focus on alternative debt resolution approaches.
    • The structure of the National Company Law Tribunal (NCLT) will be improved with MSMEs in mind.
    • For the early settlement of conflicts, an e-court will be introduced. Ease in dispute resolution will also increase the lenders’ confidence and financing for MSMEs would be readily available.
    • The use of e-courts and the ease with which disputes can be resolved would reduce legal costs and allow quicker settlement of disputes.
    • Relaxation in One person company’s conditions, will, in turn, lead to the establishment of a more organised corporation.
    • In the direction of ease of doing business and ease of compliances, there is an increase in the threshold limit of small businesses, resulting in the creation of more corporations rather than partnerships or sole proprietorships.
    • The government proposes to do so by increasing the paid-up capital and turnover rates for small businesses from ₹50 lakh to ₹2 crores and ₹2 crores to ₹20 crores, respectively.
    • MSMEs may shape companies under the small business category in order to gain confidence in lending institutions.

Why Choose Us?

You dedicate your full attention to your business, and we will handle the regulations and compliance procedures.
We offer the following services at ici:

  • Determining eligibility and obtaining registration as a MSME
  • Debt Financing – Calculation of loan eligibility
  • Equity Financing – Determining growth potential of company
  • Assistance in registration under e-markets
  • Certification for government tenders
  • Payroll processing and Provident Fund reporting
  • Assistance with calculating and filing TDS returns
  • Corporate secretarial services for Companies Act compliance

Further, ICI will assist you in complying with MSME regulations and registration.

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