Benefits of Udyam Registration for MSMEs
Micro, Small, and Medium Enterprises (MSMEs) form the backbone of India’s economy, contributing nearly 30% to the country’s GDP and generating employment for over 11 crore people. Recognizing their importance, the Government of India introduced the Udyam Registration portal to simplify and formalize the MSME registration process. For business owners, Udyam Registration is more than just a procedural formality; it is a gateway to unlocking financial, regulatory, and operational benefits. As a Chartered Accountant in Mumbai with years of experience guiding MSMEs, I have witnessed firsthand the transformation Udyam Registration can bring to small enterprises.
What is Udyam Registration?
Udyam Registration is an online process launched by the Ministry of Micro, Small, and Medium Enterprises, effective from 1st July 2020. It replaced the earlier system of Udyog Aadhaar Memorandum. MSMEs are classified based on turnover and investment, and registration is mandatory to avail benefits under various government schemes.
Classification of MSMEs as per revised definition (July 2020):
| Type | Investment Limit | Turnover Limit |
|---|---|---|
| Micro | ≤ ₹1 crore | ≤ ₹5 crore |
| Small | ≤ ₹10 crore | ≤ ₹50 crore |
| Medium | ≤ ₹50 crore | ≤ ₹250 crore |
Udyam Registration is completely free, paperless, and based on self-declaration. It requires the use of Aadhaar and PAN numbers and automatically integrates with the Income Tax and GST databases.
1. Easier Access to Finance
One of the most critical challenges MSMEs face is access to affordable credit. Udyam Registration makes MSMEs eligible for collateral-free loans under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme. This scheme offers a guarantee cover of up to ₹5 crore per borrower. Additionally, banks and NBFCs are more willing to lend to registered units due to the lower risk involved.
Udyam-registered entities also benefit from:
- Priority sector lending by banks
- Lower interest rates (often 1-2% less than market rates)
- Pre-approved and faster processing of loan applications
According to data from SIDBI (2024), MSMEs with Udyam Registration have a 37% higher approval rate for business loans compared to unregistered businesses.
2. Protection Under Delayed Payments
Udyam-registered MSMEs are protected under Section 15 to 24 of the MSMED Act, 2006. It mandates that buyers must make payments to MSMEs within 45 days of accepting goods or services. If they fail, the buyer is liable to pay compound interest at three times the RBI notified rate.
This legal backing provides:
- Enhanced liquidity for MSMEs
- Reduction in working capital cycles
- Easier enforcement through the MSME Samadhaan portal
According to MSME Samadhaan dashboard (May 2025), over 1.2 lakh delayed payment cases have been resolved in favor of registered MSMEs.
3. Benefits in Government Tenders
Registered MSMEs receive preference in procurement and are eligible for the Public Procurement Policy which mandates that 25% of total annual purchases by Central Ministries and PSUs be made from MSMEs.
Additional benefits include:
- Exemption from Earnest Money Deposit (EMD)
- Waiver of tender fee
- Relaxation in experience and turnover criteria
MSMEs can also register on the Government e-Marketplace (GeM) to supply goods and services directly to government departments.
4. Subsidies and Reimbursements
Udyam-registered MSMEs can avail various subsidies and incentives such as:
- ISO Certification Reimbursement: Up to 75% reimbursement of certification costs.
- NSIC and Market Development Support: Assistance for trade fair participation and B2B exhibitions.
- Technology and Quality Upgradation Support: 15% capital subsidy on plant & machinery.
Moreover, registered units receive rebates on electricity bills and barcode registrations.
5. Enhanced Marketability and Trust
Being Udyam-registered adds credibility in the eyes of customers, lenders, and vendors. It acts as a badge of authenticity and instills trust in potential partners and clients.
- Registration helps build business identity
- Improves access to institutional buyers
- Enhances brand value in tenders and negotiations
As a leading Tax Consultant in Mumbai, I often advise clients to showcase their Udyam Certificate on proposals, invoices, and websites to leverage this recognition.
6. Integration with Other Compliance Systems
Udyam Registration is digitally linked with:
- GST Portal
- Income Tax filings
- MCA database (for companies/LLPs)
This ensures auto-verification of data and seamless filing of future applications for funding, compliance, and tender submissions. It also reduces documentation effort and enhances transparency.
7. Role of a Chartered Accountant in the Process
Many MSMEs assume registration is straightforward. While it is designed to be simple, professional assistance ensures accurate classification, linkage to other regulatory IDs, and proper documentation for future claims.
At Makwana Sweta & Associates, we provide end-to-end support:
- Eligibility check and classification
- Udyam registration and corrections
- CGTMSE loan documentation
- Subsidy and reimbursement applications
- Tender support and bid structuring
With our professional CA services in Mumbai, MSMEs benefit from a seamless experience, reduced paperwork, and higher success rates in applying for credit, tenders, and subsidies.
Udyam Registration is not just a regulatory necessity; it is a strategic move for MSMEs to grow sustainably and competitively. From financial access to regulatory protection, from market opportunities to operational subsidies, the benefits are extensive and measurable.
If you’re an MSME or planning to start one, don’t miss out on this opportunity. Reach out to Makwana Sweta & Associates, a trusted firm of Chartered Accountants in Mumbai, and we’ll guide you through every step.