Government Schemes for MSME & Startups

Sculpting Success: Government Schemes Sculpting the Future of MSMEs & Startups

Micro, Small, and Medium Enterprises (MSMEs) forms the backbone of any thriving economy, contributing significantly to employment generation, innovation, and economic growth.

In recognition of their vital role, governments worldwide, including India, have introduced various schemes to support and uplift these enterprises. One key step for businesses looking to leverage government support is to register under the MSME scheme.

UDYAM REGISTRATION

Government has organized a system to facilitate the registration of MSMEs. An enterprise for the purpose of this process known as ‘UDYAM’ and its Registration process known as ‘Udyam Registration’.

UDYAM REGISTRATION PORTAL

• Udyam Registration process is fully digitalized, Paperless on self - declaration and Free;
• No documents or proofs are required to be uploaded for registration, only Aadhar number is sufficient;
• PAN and GST linked details on investment and turnover of enterprise will be taken automatically from Government data; and
• Online system will be fully integrated with Income Tax and GSTN Systems.

An e-certificate, namely, "Udyam Registration Certificate" shall be issued online on completion of the registration process.

POST-EFFECT OF REGISTRATION

• It will be a permanent registration and basic identification number for an enterprise.
• There will be no need for renewal of Registration.
• Any number of activities including manufacturing or service or both may be or added in one Registration.
• The Udyam Registration may also help MSMEs in availing the benefits of Schemes of Ministry of MSMEs such as Credit Guarantee Scheme, Public Procurement Policy, and additional edge in Government Tenders & Protection etc.

STARTUP SCHEMES

1. START-UP INDIA

1. This initiative aims to provide financial assistance to SC/ST and women entrepreneurs;
2. Facilitates Loan from ₹10 lakh to ₹1 crore, inclusive of term loans or working Capital or a combination of both;
3. These funds are earmarked for Greenfield projects spanning manufacturing, services, or trading sectors;
4. The Loan under this scheme can be provided without any collateral or security under the guarantee of Credit Guarantee Fund Scheme;
5. In the case of a partnership or multiple business owners, it's mandatory that the SC/ST or female entrepreneur holds a minimum ownership share of 51%;
6. Meeting the eligibility criteria for the loan involves maintaining a clear track record and ensuring no default history with any bank or financial institution; and
7. Entrepreneurs meeting these criteria can explore this scheme through various commercial banks.

2. CREDIT GUARANTEE SCHEME FOR MICRO & SMALL ENTERPRISES (CGTSME)

Objective: The scheme aims at motivating first generation entrepreneurs towards self-employment by providing credit guarantee funding for third-party guarantee-free / collateral free loans.

Current Micro, small and service Entrepreneurs & Aspiring Entrepreneur all are eligible:

• Guarantee on credits for loan up to ₹2 crore to new businesses and start-ups without any third-party guarantee and collateral;
• Extent of guarantee coverage ranges from 75% (others) to 85 %( Micro enterprise up to Rs. 5 Lakhs);
• The extent of guarantee cover is 80% for:

1. Micro and Small Enterprises operated and/or owned by women; and
2. All credits/loans in the North East Region (NER) for credit facilities upto Rs. 50 Lakh.
3. The trust settles 75% of the amount extended by the lending institutions for credits up to INR 200 lakhs.

• Extent of guarantee cover if of 50% for credit ranging from INR 10 lakh to INR 100 Lakh per micro and small enterprise borrower retail trade activity.

3. PRADHAN MANTRI MUDRA YOJANA

This scheme, initiated by the Indian government in 2015, is widely recognized as one of the most popular programs. Its overarching vision is articulated as follows:

"To be an integrated financial and support services provider par excellence, benchmarked with global best practices and standards for the bottom of the pyramid universe, promoting comprehensive economic and social development."

• The initiative is particularly designed to streamline the process of providing credit, extending support to micro-enterprises;
• Facilitates loans of up to ₹10 lakh.
• Interested borrowers have the flexibility to approach any commercial bank, small finance bank, or NBFC to access this financial assistance.
• The scheme categorizes loans into three distinct types, enhancing its adaptability to the diverse needs of the target audience:

1. Shishu loans covering loans up to ₹ 50,000;
2. Kishor Loans covering loans above ₹ 50,000 and up to ₹5 Lakh; and
3. Tarun Loans covering loans above ₹ 5 Lakh and up to ₹10 Lakh

MSME SCHEMES

1. PRIME MINISTER'S EMPLOYMENT GENERATION PROGRAMME (PMEGP)

• Financial Assistance: Offers financial assistance for setting up new micro-enterprises in the rural as well as urban areas.
• Sustainable Employment Generation: Aims to generate sustainable employment opportunities.

2. CREDIT LINKED CAPITAL SUBSIDY SCHEME (CLCSS)

• The scheme is to facilitate technological upgradation in Micro and Small Enterprises (MSEs) by providing upfront capital subsidy of 15 percent on institutional finance, capped at Rs.1 Crore, obtained by them.
• This subsidy is intended for the adoption of well-established and improved technology within the specified 51 sub-sectors approved.
• It seeks to promote the upgrading of plant and machinery in MSEs, encouraging state-of-the-art technology, whether for expansion purposes or for newly established enterprises.
• This applies to facilities equipped and proven technology.
• The comprehensive list of approved technologies is accessible at www.dcmsme.gov.in

3. TECHNOLOGY UPGRADATION FUND SCHEME (TUFS)

• Textile and Jute Industries: Provides financial assistance for the modernization of technology in textile and jute industries.
• Global Competitiveness: Aims to make these industries globally competitive.

GOODS AND SERVICES TAX (GST) SUPPORT FOR MSMEs

The modifications made to MSME-related compliances within the Goods and Services Tax (GST) regime:

• The initial exemption threshold for commodities, originally set at Rs.20 Lakhs, has been raised to Rs.40 Lakhs.
• Additionally, the annual limit for the composition program has been elevated to Rs.50 Lakhs for services and Rs.1.5 Crore for commodities.
• This adjustment now permits those engaged in the composition scheme to offer services as well.

CLUSTER DEVELOPMENT PROGRAMME

• Common Facilities: Supports the development of industrial clusters with common facilities to improve infrastructure and competitiveness.
• Collaboration: Encourages collaboration and resource sharing among businesses within a specific cluster.

MSME CHAMPIONS PORTAL

• The Portal serves as a dedicated platform for the resolution, redressal, and remedies pertaining to MSMEs. Moreover, the portal functions as a support system by guiding and assisting MSMEs in navigating various government schemes and policies.
• It offers comprehensive advisory services in areas such as Finance, Marketing, Technology, Raw Material, Labour, Infrastructure, and Capacity Building.
• It plays a crucial role in connecting MSMEs with key officials from the Ministry, State Governments, Lending Institutions, and other government agencies. This networking capability enhances collaboration and facilitates smoother interactions for MSMEs within the bureaucratic landscape.
• Additionally, the portal serves as a valuable source for disseminating information, thereby ensuring transparency and accessibility for the MSME community.

BENEFITS

• Income Tax Exemptions: Eligible startups can avail of income tax exemptions for the first three consecutive years.
• Capital Gains Tax Exemption: Exemption on capital gains for investments in eligible startups.
• Simplified Compliance: Quarterly filing of GST returns for reduced compliance burden.
• Composition Scheme: Allows eligible businesses to opt for a simplified tax structure.
• Startups can self-certify compliance with labour and environmental laws for the first three years of their existence.
• Startups can fast-track the examination of their patent applications to expedite the protection of their innovations.
• Facilitates funding through various channels, including the Fund of Funds.
• Connects startups with investors, mentors, and incubators through the Startup India Hub.
• Provides financial support to startups for proof of concept, prototype development, product trials, market entry, and commercialization.

By availing these schemes and benefits, company businesses, especially startups and MSMEs, can enjoy a range of benefits, including financial support, tax exemptions, technology upgradation, and streamlined processes. It's crucial for businesses to assess their eligibility and take advantage of the available opportunities to foster growth and sustainability.