MSME Registration Guide: A Step-by-Step Process for Udyam Registration

India’s Gross Domestic Product (GDP) benefits significantly from the substantial contributions of micro, small, and medium-sized enterprises (MSMEs). These enterprises employ over 110 million people. However, MSMEs encounter challenges and obstacles in their journey of growth and expansion. To address and support these MSMEs, the Indian government initiated a significant step on May 13, 2020, by introducing a new classification metric. Under this classification, all MSMEs in India are referred to as ‘Udyam’ and must undergo the ‘Udyam Registration‘ process. This decision received approval from the Union Cabinet, making Udyam registration mandatory for all MSMEs starting from July 1, 2020. This article will look at the MSME or Udyam registration in detail.

What is MSME?

MSME stands for Micro, Small, and Medium Enterprises. It is a classification introduced by the Government of India following the Micro, Small, and Medium Enterprises Development (MSMED) Act of 2006. These enterprises primarily produce, manufacture, process, or preserve goods and commodities. The MSME sector is crucial to India’s economy, contributing significantly to employment generation and overall economic growth.

What is Udyam Registration/MSME Registration?

Udyam Registration is an electronic certificate issued by the Indian government to Micro, Small, and Medium-sized Enterprises (MSMEs) operating in the country. It has replaced the earlier Udyog Aadhaar Memorandum (UAM) registration process. While Udyam registration is not mandatory, it offers significant benefits to MSMEs, making it advantageous for them to apply for this registration.

• By obtaining Udyam registration, MSMEs become eligible for various government benefits and incentives exclusively available to enterprises under the MSME category.
• The registration process for Udyam is entirely based on self-declaration, eliminating the need to upload any documents, papers, certificates, or proofs.

Udyam Registration Number

Upon successful registration, the enterprise, referred to as “Udyam” in the Udyam Registration portal, will be allotted a unique and permanent identity number known as the “Udyam Registration Number.”

Udyam Registration Certificate

After completing the registration process, an e-certificate called the “Udyam Registration Certificate” will be issued to the enterprise. This certificate serves as an official confirmation of their eligibility for government benefits and support.

Eligibility for MSME Registration

Udyam registration is open to enterprises within specific threshold limits, encompassing trading, manufacturing, and service sectors. The eligibility criteria for applying for Udyam registration are as follows:

• Micro Enterprises: Micro enterprises are those whose investment in machinery, plant, or equipment does not exceed Rs. 1 crore, and their annual turnover is below Rs. 5 crore.
• Small Enterprises: Small enterprises are those whose investment in machinery, plant, or equipment is below Rs. 10 crore, and their annual turnover is less than Rs—50 crore.
• Medium Enterprises: Medium enterprises are those whose machinery, plant, or equipment investment does not surpass Rs. 50 crore and their annual turnover does not exceed Rs. 250 crore.

To be eligible for Udyam registration, businesses must fall within their respective category’s specified investment and turnover limits.

Who can apply for Udyam registration?

Individuals wishing to establish a micro, small, or medium enterprise in India can apply for Udyam Registration. It extends to various types of entities, including:

• Proprietorships
• Hindu Undivided Family (HUF)
• Partnership Firms
• One-Person Companies (OPCs)
• Private Limited Companies
• Limited Companies
• Producer Companies
• Limited Liability Partnerships (LLPs)
• Any association of persons
• Cooperative societies
• Any other undertaking

Regardless of the entity type, if it falls within the MSME classification and meets the relevant criteria, it can apply for Udyam registration.

Benefits of Udyam Registration

Udyam Registration offers a range of compelling benefits to registered Micro, Small, and Medium-sized Enterprises (MSMEs). These advantages are instrumental in fostering their growth and development:

• Access to Government Schemes: Udyam registration is a prerequisite for MSMEs to avail themselves of various government schemes and programs the Ministry of MSME offers. These schemes include the Credit Linked Capital Subsidy, Credit Guarantee, Public Procurement Policy, and more. Registering under Udyam ensures that MSMEs can tap into these initiatives and receive essential financial support and incentives.
• Seamless Integration: The Udyam portal seamlessly integrates with other critical government systems, such as the income tax portal, GST identification systems, and government e-marketplace. This integration streamlines various administrative processes, making it easier for MSMEs to manage their financial and tax-related affairs efficiently.
• Priority Sector Lending: With Udyam registration, MSMEs become eligible for priority sector lending from banks. This special lending consideration enables them to access credit facilities more efficiently and at favorable terms, further supporting their business expansion and investment plans.
• Extended MAT Credit: MSMEs with Udyam registration are entitled to carry forward Minimum Alternate Tax (MAT) credit for 15 years instead of the previous ten years. This extension provides them additional tax benefits, facilitating better financial planning and stability for their long-term growth.
• Lower Interest Rates: One of the most significant advantages of Udyam registration is the ability to secure bank loans at lower interest rates. Typically, MSMEs with Udyam registration can avail of loans as low as 1% to 1.5%, reducing their financial burden and enhancing their capacity to invest in business expansion and innovation.

In conclusion, Udyam Registration serves as a gateway for MSMEs to unlock a host of benefits and support the government provides.

When to Apply for MSME Registration?

While Udyam Registration is not obligatory and remains at the entrepreneur’s discretion, most businesses should apply for MSME registration soon after establishment. Registering early allows entrepreneurs to access a range of benefits provided by the government.

Documents Required

To apply for Udyam Registration, an entrepreneur needs the following documents:

• PAN Card Number: The enterprise’s Permanent Account (PAN) card number.
• Aadhaar Number: The Aadhaar card number of the individual associated with the enterprise, depending on the type of organization:
• Proprietorship Firm: Aadhaar card number of the proprietor.
• Partnership Firm: Aadhaar card number of the managing partner.
• Hindu Undivided Family (HUF): Aadhaar card number of the Karta.
• Limited Liability Partnership (LLP), Company, Cooperative Society, or Trust: Aadhaar card number of the authorized signatory.
• GST Number: The enterprise’s Goods and Services Tax (GST) identification number.

Note: Not all enterprises must provide their GST number during the Udyam registration. Only those enterprises that necessitate GST registration under the GST law are required to furnish their GST number.

How to Get Udyam Registration Online?

To obtain Udyam Registration online, MSMEs can follow these simple steps on the Udyam registration portal:

• Step 1: Visit the Udyam registration portal.
• Step 2: On the homepage, click the option ‘For new entrepreneurs who are not registered yet as MSME or those with EM-II.’
• Step 3: Enter the ‘Aadhaar Number’ and the ‘Name of Entrepreneur,’ then click the ‘Validate & Generate OTP’ button.
• Step 4: An OTP will be sent to the mobile number linked with the Aadhaar card. Enter the OTP and click on the ‘Validate’ button.
• Step 5: Once the Aadhaar is validated, proceed to the PAN verification page. Enter the ‘Type of Organisation’ ‘PAN’ number, and click the ‘Validate’ button. Also, indicate whether you have filed the previous year’s ITR and if you have a GSTIN.
• Step 6: The Udyam registration application form will appear. Fill in all required details, including the name of the entrepreneur, mobile number, name of the enterprise, location of the plant/unit, address of the enterprise, status of enterprise, bank details, activity of the unit, NIC code, and number of persons employed.
• Step 7: Provide the following Details. Click the Submit button and Get the Final OTP.
  • Investment in plant and machinery details and turnover details.
  • Select the declaration.
• Step 8: Enter the final OTP received and submit the form. You will receive the Udyam e-registration certificate in your email.

By following these steps, MSMEs can efficiently complete the Udyam Registration process and access the benefits and support provided to registered enterprises under the MSME category.