MSMEs are the backbone of the Indian economy. They contribute to GDP growth and create employment for the country. MSME registration can avail a number of benefits including but not limited to government schemes, loans, and grants. But it is a very difficult process. This article highlights the key challenges that companies face while registering under the MSME category and how these challenges can be overcome.
What are Micro, Small & Medium Enterprises?
MSME, formerly known as Small Scale Industries (SSI), includes manufacturing and service enterprises as per the MSMED Act, 2006. The classification of the manufacturing units is based on the investment in machinery, while service units are based on equipment investment. Businesses that meet the investment limits can apply for an MSME/SSI certificate.
Understanding MSME Registration
MSME registration is a process through which enterprises are classified as micro, small, or medium-sized based on investment and annual turnover. This registration has several benefits such as:
- Collateral-free loans
- Government subsidies
- Priority in procurement policies
- Tax rebates
Despite these benefits, many businesses face challenges while registering. There are several major challenges to MSME registration.
- Lack of Awareness
Among the major drawbacks is that most entrepreneurs are ignorant of the process of registration under MSME and its advantages. They do not know the documents required and how to apply online as well as their eligibility criteria. An example would be that one applying for registration MSME would also require registration for his brand with Trademark Registration.
Solution:
Educational campaigns, workshops, and online resources can increase awareness among entrepreneurs.
2. Long Process of Document Preparation
Documentation is a process for MSME registration, involving several documents:
- The Aadhaar card of the owner
- PAN card
- Proof of Business address
- Details of the Bank account
- There are many small business owners who find it quite difficult to collate and upload documents.
Solution
Streamlining the document requirements and having proper instructions to follow would simplify the process even more.
3. Technical Issues on the Online Portal
The portal at which the registration of MSME takes place usually faces a problem of technical failure, for instance, it fails to open immediately, has error messages and some applications don’t work well on the site.
Solution
Increasing the technical backup of the portal along with proper IT support.
4. Classification Ambiguity
Understanding whether a business qualifies as a micro, small, or medium enterprise based on investment and turnover limits can be confusing. Misclassification may attract the rejection of the application.
Solution:
A detailed classification tool or guide on the portal can help applicants understand where their business fits.
5. Absence of Professional Support
Most first-time business owners do not have access to professional help when filling out and submitting the registration form. In the case of private limited companies or LLPs, MSME registration is a prerequisite after obtaining Company Registration.
Solution:
Encouraging MSME facilitation centers to provide hands-on support and collaborating with private agencies can address this issue.
6. Delays in Approval
Even after submitting all documents correctly, applicants may face delays in getting their MSME certificates due to procedural bottlenecks.
Solution:
Automating verification processes and introducing a time-bound approval system can reduce delays.
7. Fear of Compliance Audits
Some small business owners avoid registration, fearing increased scrutiny and compliance requirements. Accurate ITR filing is essential for businesses to maintain transparency and avail tax benefits.
Solution:
It would reduce the fear of compliance with the expectations, thereby making the ease of doing business for the registered MSMEs.
How to Overcome MSME Registration Challenges
Both the government and private sector can contribute to making MSME more accessible. The ways to do so are as follows:
- Simplification of processes: A user-friendly interface on the Udyam portal.
- Increasing awareness: Creating mass awareness of benefits and procedures to entrepreneurs.
- Facilitation assistance: Establishment of facilitation centers across India.
- Linguistic assistance: Providing literature support in multi-linguism to enhance ease of accessibility.
Benefits of MSME Registration
Even with its problems, the advantages of MSME prevail on its hindrances. Such includes,
-Easy credit availability.
- Lower interest rates
- Government-backed protection in delayed payments
- Exclusive participation in government tenders
With these challenges being addressed, more businesses can take advantage of these benefits, thereby contributing to the growth of the MSME sector and the Indian economy.
Conclusion
The right resources and support systems can overcome the challenges of MSME registration in India. It is the responsibility of entrepreneurs to proactively learn about the process involved and when required, seek assistance. The government should focus on enhancing the infrastructure and accessibility of the Udyam portal. In due course, this makes the whole process of registration as an MSME hassle-free for all.