MSME Registration
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This article is written by Gaurav Kumar, from Surendranath Law College, University of Calcutta. The new process for the registration of the Micro, Small and Medium Enterprises has been explained in the article.


The term MSME refers to Micro Small and Medium Enterprises. In India, the MSME industries play as a backbone for the Indian economy as it accounts for 30 percent of the Indian GDP. It accounts for 45 percent of the total industrial employment, 50 percent of India’s total exports and 95 percent of industrial units of the country. Almost 6000 types of products are manufactured in the MSME industries as the data provided by its website. These MSMEs need to get themselves registered before establishment. The registration provides the enterprises to avail of financial aid and benefits. The financial aids and benefits include low-interest bank loans without any collateral security and Government assistance for the growth of MSME. 

The Government of India revised its registration process for MSME with effect from 1st July 2020. Now, it will be known as “UDYAM REGISTRATION” the hindi meaning of the term being “enterprises”. To avail the benefits, the government provided benefits the MSME has to undergo itself through the “UDYAM REGISTRATION”. The registration can be done online by visiting the website “”. The changes in the registration process have also changed the classification criterion of the MSME. In this article, we will closely observe the registration process and other things related to the MSME that have changed after the revised process of the Government.

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What are Micro, Small and Medium Enterprises

The Micro, Small and Medium Enterprises also known as Small-scale enterprises is a set-up of the industrial structure introduced by the Government in agreement with the Micro, Small and Medium Enterprises Development (MSMED) Act of 2006. These enterprises are majorly engaged in the production, manufacturing, preserving and processing of goods and commodities. MSME is one of the most important sectors of the Indian economy and has contributed a lot in the development of the socio-economic structure of the vital role in developing the Indian economy. 

The MSME sector has not only created employment by providing jobs to unskilled and semi-skilled individuals in the rural sector, but it has also worked for the development of rural and semi-urban regions of India.

Before 2018, the MSMEs were defined according to their annual amount invested but later after the government through a notification stated to change the definition of the MSME based on their annual turnover regardless of whether they belong to the manufacturing sector or service sector. The inadequacy of financial support is the major challenge that the MSME sector faces in general. To get financial support like collateral security free loans, low-interest bank loans and financial aid, the enterprises have to get themselves registered through the new process. 

Classification of enterprises

Before the revision, the classification of the MSME was done under the Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act). This classification was based on two factors: the investment in the plant or machinery and the turnover of the enterprises. The MSME were also classified based on the role they are engaged in the manufacturing and the service. Later on, under the Atma Nirbhar Bharat Yojana, Ministry of Micro, Small and Medium Enterprises, vide its notification dated June 1, 2020, revised the MSME classification by inserting a combined provision comprising annual turnover and the investment in plant and machinery. Under this classification, the distinction between the manufacturing sector and the service sector has been removed.

The revised classification of the enterprises is based on the criteria provided below:

  1. An enterprise shall be called a micro-enterprise where the investment in machinery and equipment shall be not more than 1 crore rupees and turnover shall be not more than 5 crore rupees.
  2. An enterprise shall be known as a small-enterprise where the investment in machinery and equipment shall be not more than ten crore rupees and the turnover shall not exceed more than fifty crore rupees.
  3. An enterprise shall be known as a medium-scale enterprise where the investment in machinery and equipment is not more than fifty crore rupees and the turnover is not more than two-hundred-fifty crore rupees.

MSME registration UDYAM process

An applicant who intends to establish the micro, small and medium enterprise may apply for online registration on the Udyam portal. The new entrepreneurs can register themselves by visiting the online udyam portal proceeding over the “for new entrepreneurs who are not registered yet as MSMEs” section where they have to enter their aadhaar number and verify themselves after entering OTP received on their mobile number. The applicants have also the option to get themselves registered through the PAN Card. They need to go to the “Pan Card Registration” section to fill in the details of the PAN card. 

After verification of PAN, the “Udyam Registration” box will appear and the entrepreneurs need to fill in the personal details along with the details of the plant or industry. Once the details are filled, the applicant can submit them after entering the final OTP. The applicant can also get themselves registered without a PAN card. They just have to provide this information on the portal before the registration. After completion of registration on the portal, the enterprises shall be provided with a permanent identification number known as “Udyam registration number”. The enterprises shall be referred to as the “Udyam” as it is its hindi meaning. An e-certificate bearing name “Udyam certificate” shall be granted to the applicant post-registration completion.

Benefits of MSME Udyam Registration

The enterprises will avail several benefits after registering with “Udyam”. The benefits are provided as:

  • After MSME registration the enterprises can avail loans at a very low rate of interest from the bank. The interest rate is very low in comparison with the regular loans (up to 1.5% – 2%).
  • The facility of tax rebates is available to the enterprises.
  • The enterprises are provided with an extended period of credit for minimum alternate tax (MAT) which is now 15 years instead of 10 years.
  • Once registration is done, the lesser cost for patent registration, setting up of the industry and the other concessions are available for the enterprises.
  • MSME registration provides the priority in getting the government tenders as the Udyam registration portal is linked with the government e-marketplace and various other state government market portals which provides easy access to e-tender.
  • The enterprises are also provided with a high preference order from the government in terms of licensing and certification.
  • The enterprises have the option of one-time settlement in case of non-payment of dues.

Information required for MSME Udyam registration

These are the necessary documents that are required for the registration of MSME:

  • An aadhaar card is the only mandatory document that is needed for registration. Except for this, no documents are required while registration.
  • The enterprises have the option of providing PAN Card detail in case it holds. The process of registration is fully online and PAN and GST related details on turnover and investment shall be automatically drawn from the government database. However, from 01 April 2021 GST and PAN cards shall become mandatory for registration.
  • No enterprises shall file for more than one Udyam registration. In the case of enterprises providing separate services and manufacturing different products, each one shall be specified under one registration.
  • In case of enterprises being a Company or a Limited Liability Partnership or a Co-operative Society or a Society or a Trust, the organization or its authorized signatory shall provide its GSTIN and PAN along with its Aadhaar number.
  • In case the establishment of the enterprises is in the rented property the applicant needs to provide rent agreement, receipt, and NOC from the landlord or its equivalent are necessary documents required for the proof for landlord’s ownership.
  • In the case of a self-owned office, the enterprises must possess an allotment letter, possession letter, property tax receipt and lease deed. If the municipal license exists on the name of the director, proprietor and partner of the enterprises/company.
  • Purchase receipt of each machinery and instrument including product sale receipt.
  • Copy of important licences along with partnership deed in case the enterprise is owned by more than one partner.
  • Copy of board resolution along with the incorporation certificate.

MSME Udyam Registration Penalty

Section 27 of the Micro, Small and Medium Enterprises Development Act, 2016 provides the penalty provision for those who intentionally suppress or mislead the self-declared facts which are duly required to furnish while Udyam registration or update process shall be liable for a fine which may extend up to one thousand rupees while first conviction. On the subsequent conviction, the fine shall be a minimum of one thousand rupees extending up to ten thousand rupees.

If the enterprises are found in violation of the provision of furnishing the audit details as provided under Section 22 of the MSME Development Act, 2016, they will be punished with a fine of not less than ten thousand rupees.

MSME schemes launched by the Government 

A variety of schemes have been launched by the government for MSME businesses. The schemes are provided below:

Zero Defect Scheme

The MSMEs can be a part of this scheme by manufacturing goods of certain prescribed standards that could be exported outside. The major aim behind the compliance with the standards is that the products shall face good response and acceptance in the global markets. The other perks are tax rebates and concessions on the exported goods.

Incubation Scheme

The MSMEs which bring forward innovative ideas, designs and products in the market are encouraged and promoted by the Government. The government manages up to 75-80 percent of the financial cost incurred on such innovative products under this scheme.

Udyog Aadhaar Memorandum Scheme

One needs to have a mandatory aadhaar card for availing benefits under this scheme. The benefits provided in this scheme include easily available loans, government credits and financial aids.

Quality Management Standard and Quality Technology Tools

The MSMEs are required to maintain standard quality along with new technology. Under this scheme, the government conducts several seminars, expert sessions and guides the new MSMEs to increase awareness about the existing new technology in the market.

Grievances Monitoring System Scheme

This scheme provides the registered MSMEs to register complaints, check the status of their complaints and keep them further open if they feel that the outcome is not satisfactory and praiseworthy.

Women Entrepreneurship Scheme

Under this scheme, the government encourages women entrepreneurs by offering them capital, loan assistance, providing them training, counselling and delivering technical methods making them advanced in the particular field to operate their MSMEs independently. It also helps women to broaden and expand their MSMEs.

Credit linked capital subsidy Scheme

The Government, under this scheme, offers the latest advanced technology as a replacement for old technology. The government also provides subsidiaries to expand its business to achieve the capability. The MSMEs registered under this scheme can directly approach the banks for availing of such services.

Despite all the above schemes the government is providing other schemes for the growth of MSMEs. 


Micro, Small and Medium Enterprises are the small scale industries that are engaged in manufacturing and service providing. The MSMEs are known as the backbone of the Indian economy as it shares almost one-third of the Indian GDP. The Government has not made the registration of the MSME mandatory with the Udyog portal but “Udyog registration” provides numerous advantages to the MSMEs. The revised process of registration has changed the classification of the MSMEs taking the investment and turnover aspects combined. The enterprises can now undergo registration via the online “Udyog Portal” and avail the benefits provided by the government.


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