In India, different types of relaxation have been provided to a number of organizations. The same goes for MSME Sector in India. Prior to launching a business, factory owners are required to register their facilities with local authorities under the 1948 Factory Act. A Factory License is an official government document granting permission to conduct manufacturing operations. This article discusses whether a factory license is mandatory for MSME.
What is Factory as per Factory License Rules?
‘Factory’ refers to any location, including its surroundings—
- In any section of which a manufacturing process is being carried out with the help of electricity, or is typically carried out, and where 10 or more workers are working or have worked in the prior twelve months;
- a place where at least twenty people are employed or have been employed, on any given day in the previous year, and where a manufacturing process is being carried out without the use of electricity, or is regularly carried out in this manner, According to the aforementioned standards, a factory license registration is required when the number of employees rises to 10 / 20.
What is MSME?
Very small, small, and medium-sized businesses are referred to as MSME. Micro, small, and medium-sized enterprises (MSME) were given official recognition by the Indian government by the enactment of MSMED (the MSMED Act of 2006). As defined by this legislation, MSMEs are those businesses that are involved in the processing, manufacturing, and storage of products and commodities.
Importance of MSME and MSME Registration
Micro, small, and medium-sized enterprises (MSME) form the heart of the economy in emerging nations like India. To put it another way, the country’s economy thrives when these businesses expand. It doesn’t matter if the business is in the manufacturing or service sectors; the MSME statute allows for registration in either case. As MSMEs play an important role in the economy of India, the Govt. provides several benefits to aid MSME businesses through MSME Registration.
Is factory license mandatory for msme sector in 2022?
According to the Ministry of Industry [Department of Industrial Development] notice no 412 dated July 25, 1991, the small-scale industry is not required to get a Factory License to manufacture Schedule III items. Small scale industry is defined as an industrial establishment in which the investment in plant and machinery, whether held on ownership terms, lease terms or hire purchase, does not exceed rupees three crores. As per latest updates, the factory license is not mandatory for eligible business under MSME Sector in 2022.
Impact of Factory License not Mandatory for MSME Sector
The government has reduced licensing regulations for several manufacturing sectors, making it easier to do business. Except for tobacco products, defense equipment, hazardous chemicals, and industrial explosives, the government has said that no license will be necessary for the manufacturing of goods.
The change is anticipated to benefit micro, small, and medium businesses (MSMEs) significantly by removing the need for them to seek permits for manufacturing smaller things.
In addition, MSME Businesses can get MSME Registration and avail several benefits of it.
Benefits of MSME Registration
- Reimbursement of Government fees for Trademark Registration and Patent Registration
- Collateral-Free Business Loans
- Easy availment of the Overdraft Facilities
- Protection against delayed payments
- Reimbursement of ISO Certification Expenses
- Subsidy on Electricity Bills
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