MSME / Udyog Aadhar

In accordance with the provisions of the Micro, Small & Medium Enterprises Development (MSMED) Act, 2006, Micro, Small and Medium Enterprises (MSMEs) are classified in two classes:

• Manufacturing Enterprises. The enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951, or employing plant and machinery in the process of value addition to the final product, having a distinct name or character or use. The Manufacturing Enterprises are defined in terms of investment in Plant & Machinery.
• Service Enterprises. The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment.

An enterprise for the above purpose may be a proprietorship, partnership firm, Hindu Undivided Family, Association of Persons, co-operative society, company or undertaking, by whatever name called.

The investment-and-turnover based classification of MSMEs was unified across the Manufacturing and Service sectors by the MSMED (Amendment) Act, 2020 read with Notification S.O. 2119(E) dated 26 June 2020. The limits were further revised with effect from 1 April 2025 (as announced in the Union Budget 2025-26). The current unified classification is as under:

Both the investment and turnover thresholds must be satisfied; an enterprise crossing either ceiling moves to the next higher class. The current figures and any subsequent revisions are available on the official Udyam portal at udyamregistration.gov.in.

1. Priority lending to MSMEs at concessional interest rates and collateral-free:

• Banks’ lending to the Micro, Small and Medium enterprises as below is eligible to be reckoned for priority sector advances.
• Further, the Government through RBI made collateral-free credit available to all small and micro business sectors at concessional interest rates. This initiative guarantees funds to micro and small sector enterprises.
• As part of access to credit, the Prime Minister announced 2% interest subvention for all GST-registered MSMEs, on fresh or incremental loans.
• The Ministry of MSME, Government of India and SIDBI set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) with a view to facilitate flow of credit to the MSE sector without the need for collaterals / third-party guarantees. The main objective of the scheme is that the lender should give importance to project viability and secure the credit facility purely on the primary security of the assets financed.
• In terms of RBI circular RPCD.SME&NFS.BC.No.79/06.02.31/2009-10 dated May 6, 2010, banks are mandated not to accept collateral security in the case of loans up to Rs. 10 lakh extended to units in the MSE sector. Further, in terms of RBI circular RPCD/PLNFS/BC.No.39/06.02.80/2002-04 dated November 3, 2003, banks may, on the basis of good track record and financial position of MSE units, increase the limit of dispensation of collateral requirement for loans up to Rs. 25 lakh with the approval of the appropriate authority.
• Credit rating is not mandatory but it is in the interest of the MSE borrowers to get their credit rating done as it would help in credit pricing of the loans taken by them from banks.
• A composite loan limit of Rs. 1 crore can be sanctioned by banks to enable the MSME entrepreneurs to avail of their working capital and term loan requirement through Single Window in terms of RBI Master Direction on lending to the MSME sector dated July 24, 2017. All scheduled commercial banks were advised by RBI circular RPCD.SME&NFS.BC.No.102/06.04.01/2008-09 on May 4, 2009 that the banks which have sanctioned term loan singly or jointly must also sanction working capital (WC) limit singly (or jointly, in the ratio of term loan) to avoid delay in commencement of commercial production, thereby ensuring that there are no cases where term loan has been sanctioned and working capital facilities are yet to be sanctioned.
• Scheduled commercial banks have been advised in terms of RBI circular RPCD.SME&NFS.BC.No.102/06.04.01/2008-09 dated May 4, 2009 to put in place a non-discretionary One Time Settlement scheme duly approved by their Boards.

2. IPR registration concessions: 50% concession on Government Fees for IPR registrations namely Trademark and Patents is available to MSME units.

3. Trade fair participation: Governments provide benefits to participate and special consideration in the international and national trade fairs which are organised by the MSME Department.

4. Government tender preference: MSME-certified enterprises are preferred in government tenders during the bid.

5. State-level subsidies and concessions: MSME units can also avail subsidies for industrial promotion, concessions in electricity bills as per the policy of State Governments, and reimbursement of expenses incurred for ISO registration.

6. Protection against delayed payments from customers:

• With the enactment of the Micro, Small and Medium Enterprises Development (MSMED) Act 2006, for the goods and services supplied by the MSME units, payments have to be made by the buyers within 45 days.
• Further, the agreement between seller and buyer for payments shall not exceed more than 45 days.
• If the buyer fails to make payment of the amount to the supplier, he shall be liable to pay compound interest with monthly rests to the supplier on the amount from the appointed day or, on the date agreed on, at three times of the Bank Rate notified by Reserve Bank.
• In case of dispute with regard to any amount due, a reference shall be made to the Micro and Small Enterprises Facilitation Council, constituted by the respective State Government.
• To take care of the payment obligations of large corporate borrowers to MSEs, banks have been advised that while sanctioning / renewing credit limits to their large corporate borrowers (i.e. borrowers enjoying working capital limits of Rs. 10 crore and above from the banking system), to fix separate sub-limits, within the overall limits, specifically for meeting payment obligations in respect of purchases from MSEs either on cash basis or on bill basis. Banks are also advised by RBI to closely monitor the operations in the sub-limits, particularly with reference to their corporate borrowers’ dues to MSE units, by ascertaining periodically from their corporate borrowers the extent of their dues to MSE suppliers and ensuring that the corporates pay off such dues before the ‘appointed day’ / agreed date by using the balance available in the sub-limit so created. In this regard the relevant RBI circular IECD/5/08.12.01/2000-01 dated October 16, 2000 (reiterated on May 30, 2003, vide circular No. IECD.No.20/08.12.01/2002-03) is issued by RBI. This deters delayed payment to MSME Units.
• Further, the penal interest paid by the buyer, or payable by the buyer, is not allowed as expenditure under Section 23 of the Income Tax Act, 1961. This deters delayed payment to MSME Units.
• All companies and entities who are required to get their books audited are required to make necessary disclosures under Section 22 of the Micro, Small and Medium Enterprises Development Act, 2006 and Schedule III of the Companies Act, 2013. This deters delayed payment to MSME Units.
• MCA, vide notification “Specified Companies (Furnishing of Information about payment to micro and small enterprise suppliers) Order, 2019” dated 22nd January 2019, mandates that all specified companies who buy goods or avail services from micro and small enterprises, and whose payments to such suppliers have exceeded 45 days, shall submit a half-yearly return (e-form MSME Form I) to the Ministry of Corporate Affairs (MCA). This deters delayed payment to MSME Units.

• Registration under Karnataka Shops and Commercial Establishments Act 1961
• Professional Tax Registration
• Registration under Employee Provident Fund
• Registration under Employee State Insurance
• Import Export Code
• STPI or Non STPI Registration
• Trade License from BBMP
• APEDA Registration
• FSSAI