Building Bharat: Government Reforms and Support for MSMEs

Definition and Criteria of MSME (As per Notification S.O. 1364(E), Effective 01.04.2025)

The Ministry of Micro, Small and Medium Enterprises (MSME), Government of India, revised the classification criteria for MSMEs through Gazette Notification S.O. 1364(E) dated 21 March 2025. This amendment, effective 1 April 2025, replaces the earlier limits set in 2020 to accommodate the growing scale of Indian enterprises.

Under the updated framework, enterprises are classified based on investment in plant & machinery or equipment and annual turnover. The same criteria apply uniformly to both manufacturing and service sectors.

To qualify under a specific category, an enterprise must meet both the investment and turnover conditions. If either limit is exceeded, the enterprise is reclassified into the next category.

This update aims to ensure that growing enterprises can continue to access MSME benefits such as priority sector lending, subsidies, tax exemptions, and ease of doing business—thereby strengthening the sector's role in employment, exports, and GDP contribution.

Registrations

The registration of Micro, Small, and Medium Enterprises (MSMEs) in India is governed under the Udyam Registration portal (https://udyamregistration.gov.in), a fully digital and paperless process introduced by the Ministry of MSME. Effective from 1st July 2020, this registration replaced the earlier system of Udyog Aadhaar Memorandum (UAM).

Registration Process:

1. Eligibility: Any enterprise meeting the revised criteria (as per Notification S.O. 2119(E), dated 26.06.2020, and updated via Gazette Notification S.O. 1364(E), dated 21.03.2025) can register as a Micro, Small, or Medium enterprise.
2. Online Application:
   • Visit the Udyam portal.
   • Use Aadhaar number of the proprietor/partner/director.
   • PAN and GSTIN are mandatory (from April 2021).
3. Auto-fetch Data: Details such as investment in plant & machinery and turnover are auto-fetched from Income Tax and GST portals.
4. No Fee: Registration is free of cost.
5. Single Registration: One registration per PAN; multiple activities can be included.

Key Benefits of Udyam Registration:

• Collateral-Free Loans: Access to government-backed credit under the Credit Guarantee Fund Scheme.
• Subsidy & Rebate: Eligibility for interest subsidies, technology upgradation schemes, and patent registration subsidy.
• Tender Relaxations: Exemption from Earnest Money Deposit (EMD) and security deposits in government tenders.
• Protection Against Delayed Payments: Legal protection under Section 15–24 of the MSMED Act, 2006 for delayed payments.
• Priority Lending: Easier access to finance under Priority Sector Lending (PSL) norms.
• Access to Government Schemes: Like the Champion Scheme, ZED Certification, and MSME Samadhan Portal.

Udyam Registration is not mandatory, but it unlocks a wide array of financial, legal, and administrative benefits, empowering MSMEs to scale and compete effectively in both domestic and global markets.

Benefits to MSMEs under Make in India

The Make in India initiative strengthens MSMEs by offering policy support, financial aid, infrastructure, and market access to boost domestic manufacturing and employment. MSMEs, contributing nearly 30% to India's GDP, are central to the initiative's goal of making India a global manufacturing hub.

These benefits enhance MSME competitiveness, enabling them to scale, create jobs, and contribute to Make in India's vision.

Benefits to MSMEs under Startup India – With Key Pointers

The Startup India initiative, launched by the Government of India in 2016, has created a robust support system for MSMEs by promoting innovation, easing regulatory processes, improving access to funding, and encouraging participation in government procurement. Below are the key benefits that MSMEs can avail under this initiative:

1. Easy Registration and Compliance

• Startups can register seamlessly through the Startup India portal and mobile app.
• Recognized startups can self-certify under 9 labour and environment laws, reducing the burden of inspections and audits.
• This simplification allows MSMEs to focus more on operations and growth rather than bureaucracy.

2. Tax Benefits

• 100% income tax exemption on profits for 3 consecutive financial years within the first 10 years of incorporation under Section 80-IAC.
• Exemption from Angel Tax under Section 56(2)(viib) for DPIIT-recognized startups. This makes fundraising easier and more tax-efficient.

3. Access to Funding

• Eligible startups can benefit from the ₹10,000 crore Fund of Funds managed by SIDBI, which invests in venture capital funds supporting early-stage startups.
• This enables MSMEs to access equity-based funding even if they lack traditional collateral.

4. Participation in Government Tenders

• MSMEs registered as startups are exempt from prior experience and turnover criteria in public procurement.
• Integration with the Government e-Marketplace (GeM) allows startups to list and sell products/services directly to government departments.

5. Intellectual Property Support

• Startups receive up to 80% rebate on patent filing fees and 50% on trademark filing.
• Fast-track examination of patents and legal support from IPR facilitators is available, helping MSMEs protect and commercialize innovations quickly and affordably.

6. Networking and Mentorship

• Access to over 75+ government-recognized incubators, accelerators, and industry bodies.
• Participation in national and international startup fests, pitch events, and mentoring sessions helps in capacity building and business exposure.

🏢 Benefits to MSMEs on GeM Portal

Government e-Marketplace (GeM) is the Public Procurement Portal for procurement of goods and services for all Central Government and State Government Ministries, Departments, Public Sector Units (PSUs) and affiliated. GeM endeavours to make public procurement process transparent, efficient and inclusive. MSMEs enjoy several exclusive benefits on GeM to boost participation and competitiveness.

📝 Eligibility for Benefits:

• MSME shall be registered on Udyam Portal (for MSME recognition).
• MSME should complete seller registration on GeM Portal.
• MSME should ensure product/service catalog is updated and compliant with GeM specifications.

Subsidies

Here's a structured overview of subsidies and benefits available for MSMEs in India along with their eligibility criteria, updated as per the latest government schemes:

1. Credit Linked Capital Subsidy Scheme (CLCSS)

CLCSS offers a 15% subsidy on capital investment (up to ₹15 lakh) for MSMEs in the manufacturing sector to upgrade their technology and improve productivity. The scheme aims to promote modernization by facilitating the purchase of new, state-of-the-art machinery. Only MSMEs registered with Udyam are eligible, and it is implemented through SIDBI and banks under the Ministry of MSME. This subsidy helps reduce the financial burden of capital investment and ensures competitiveness in domestic and global markets.

2. Prime Minister's Employment Generation Programme (PMEGP)

PMEGP is a credit-linked subsidy program providing up to 35% subsidy on the project cost for setting up new enterprises. It targets first-time entrepreneurs and promotes self-employment in rural and urban areas. Udyam registration is mandatory, but no prior business experience is required. Implemented by KVIC, DIC, and the Coir Board, this scheme helps in generating employment and fostering entrepreneurship across India, especially in economically weaker sections and among youth.

3. Technology and Quality Upgradation Support (TEQUP)

The TEQUP scheme encourages MSMEs in the manufacturing sector to adopt energy-efficient technologies by offering a 25% subsidy on machinery (up to ₹10 lakh). It promotes sustainable development by reducing energy consumption and enhancing the quality of goods. By supporting eco-friendly practices, this initiative not only reduces operational costs for MSMEs but also contributes to environmental protection. It is spearheaded by the Ministry of MSME to drive competitiveness through technological advancement.

4. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

CGTMSE offers collateral-free credit up to ₹5 crore to new and existing MSMEs with valid Udyam registration. By mitigating the credit risk for banks and financial institutions, it encourages them to lend more to small enterprises. The scheme is jointly implemented by SIDBI and NSIC, aiming to promote entrepreneurship by removing the barrier of collateral. This significantly improves access to finance for micro and small businesses, which often struggle with traditional lending norms.

5. Interest Subsidy Eligibility Certificate (ISEC) Scheme

ISEC provides interest subsidies on working capital loans specifically for coir-based MSMEs. The objective is to support the traditional coir industry by reducing the cost of capital and ensuring liquidity for operational needs. Registered coir units can avail of this scheme through the Coir Board. By lowering the interest burden, the scheme enhances the viability and sustainability of coir businesses, especially in rural and coastal areas where this industry plays a significant socio-economic role.

6. Procurement and Marketing Support (PMS)

This scheme offers financial assistance to micro and small enterprises for participating in trade fairs, exhibitions, and buyer-seller meets. It aims to boost market access and visibility for MSME products, both domestically and internationally. Implemented by the DC-MSME, PMS supports branding, packaging, and marketing initiatives. By helping MSMEs establish business linkages and expand their customer base, the scheme strengthens their competitive position and contributes to their overall growth.

7. Zero Effect Zero Defect (ZED) Certification Scheme

The ZED scheme promotes quality manufacturing by providing subsidies on certification costs and assistance for upgrading to zero-defect, eco-friendly production. It encourages MSMEs to adopt best practices, minimize wastage, and ensure product consistency. All manufacturing MSMEs are eligible, and the scheme is implemented by the Quality Council of India (QCI). It not only boosts product quality and customer trust but also prepares MSMEs to meet global quality standards and access international markets.

8. MUDRA Loan (Under PMMY)

Under the Pradhan Mantri MUDRA Yojana (PMMY), micro enterprises in the non-farm sector can avail of loans up to ₹10 lakh without collateral. These loans fall under three categories: Shishu (up to ₹50,000), Kishore (₹50,001–₹5 lakh), and Tarun (₹5–10 lakh). Banks, NBFCs, and Micro Finance Institutions (MFIs) implement this scheme to foster entrepreneurship at the grassroots. It is particularly beneficial for small vendors, artisans, and service sector entrepreneurs aiming to start or expand their businesses with easy credit access.