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Understanding the Differences - Micro, Small and Medium Enterprises

By IIFL Home Loans | Published On Feb 28 2024 12:43 PM 1 min read 40 views 5718 Likes
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Mid-sized businesses play a vital role in the overall development of India. The government has classified such businesses as MSME businesses, i.e., Micro, Small and Medium Enterprises. As per the Press Information Bureau, the share of MSME in India’s GDP stood at 29.2% in the year 2021-22 while their share in manufacturing and exports stood at 36.2% and 43.6% respectively. However, when we talk about MSME, what is the difference between Micro, Small, and Medium-sized enterprises? Let's find out!

Difference Between Micro, Small, and Medium Enterprises

The government has bifurcated small and mid-sized businesses into three categories, i.e., micro, small, and medium enterprises based on the turnover and investment in plant and machinery. Here are the eligibility criteria for Micro, Small, and Medium Enterprises:

  • Micro Enterprises: Businesses can be classified as micro-enterprises if their turnover is not more than Rs. 5 crores and the investment in plant and machinery is not more than Rs. 1 crore.

  • Small Enterprises: Businesses can be classified as small enterprises if their turnover is not more than Rs. 50 crores and the investment in plant and machinery is not more than Rs. 10 crores.

  • Medium Enterprises: Businesses can be classified as medium enterprises if their turnover is not more than Rs. 250 crores and the investment in plant and machinery is not more than Rs. 50 crores.

Thus, we can summarize the eligibility of micro, medium, and small enterprises as follows:

Classification

Annual Turnover

Investment

Micro Enterprises

Not more than Rs. 5 crores

Not more than Rs. 1 crore

Small Enterprises

Between Rs. 5 crores and Rs. 50 crores

Between Rs. 1 crore and Rs. 10 crores

Medium Enterprises

Between Rs. 50 crores and Rs. 250 crores

Between Rs. 10 crores and Rs. 50 crores

How to Get Registered as an MSME Enterprise?

To claim all the benefits from the schemes initiated for MSME enterprises, you need to register as an MSME enterprise. UDYAM registration is the official MSME registration by the government. Here’s how you can obtain UDYAM registration in India:

  1. 1. Visit the MSME registration portal

  2. 2. Click on the tab ‘For New Entrepreneurs who are not Registered yet as MSME or those with EM-II’

  3. 3. Enter your Aadhaar number and name as per Aadhaar. In the case of HUF, partnership firms, and companies, the Aadhaar number of Karta, partner, or director needs to be entered.

  4. 4. Click on ‘Validate & Generate OTP’. An OTP will be sent to your mobile number linked to your Aadhaar card.

  5. 5. Continue filling in the registration form. You need to enter the PAN of the organization if you are obtaining UDYAM registration for HUF, partnership firms, and companies.

  6. 6. After you fill in all the details, send the OTP to verify the same.

  7. 7. Your UDYAM registration number will be generated. Click on ‘Print Certificate’ to generate your MSME registration certificate.

Advantages of Micro, Small and Medium Enterprises

The following are the significant benefits of obtaining MSME registration in India:

  • Government Schemes: The government launches various schemes to uplift the MSME registration and enhance credit inclusion, especially for micro and small-scale industries. To benefit from these schemes, it is important to obtain MSME registration by applying for a UDYAM certificate.

  • Affordable Loans: Banks and financial institutions provide loans to MSME sectors at affordable rates as the MSME sector is classified as a Priority Lending Sector. Further, the government also provides concessions in interest rates on the loans granted to MSME businesses.

  • Benefits Under Taxation Laws: The government has inserted a special clause for micro and small-scale industries under Section 43B of the Income Tax Act, 1961 that provides deductions based on payment. Now businesses can claim a deduction for expenses related to such vendors only if payment is made within 45 days at maximum.

  • Concessions in Intellectual Property Registration: Intellectual property registrations like trademarks encompass certain government fees. You can claim concession in IP registration fees if you are an MSME business.

In a Nutshell

MSME businesses are known to be the backbone of the economy. Their contribution to the economy and GDP highlights their importance. The government has launched various schemes and provided many concessions to the MSME businesses to help them grow and expand their businesses and become the best small-scale businesses. Financing plays an important role in this regard.

IIFL Home Loans is a pioneering institution that has enabled many MSMEs to grow and expand their businesses. You can seamlessly apply for secured business loans at some of the most affordable interest rates and flexible tenure. With simple to fulfil eligibility criteria, you can avail yourself of instant business loans whether you are a shopkeeper, wholesaler, retailer, manufacturing enterprise, or a self-employed professional. Click here to apply for business loans now!

FAQs

Q1: For what purpose can we use business loans?

A: You can use business loans to start your business, grow and expand the same, purchase any plant and machinery, and meet any other business-related expenses.

Q2: Is there any government cost for obtaining MSME registration?

A: No. There are no government fees for obtaining MSME registration.

Q3: Are business loans secured or unsecured?

A: There are two types of business loans – secured and unsecured. Secured business loans require you to furnish collateral security whereas unsecured business loans do not require you to furnish any collateral security.  

Q4: Is it compulsory to obtain MSME registration?

A: While it is not compulsory to obtain MSME registration, doing so can confer a lot of benefits like priority sector lending, concession in IP registration, tax benefits, etc.

Q5: How to select the right lender for business loans?

A: To select the right lender, you need to compare different lenders in terms of interest rate, eligibility criteria, and flexibility in terms and conditions. This will help you select the right lender.

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