How to Set-Up an Enterprise
Legal Aspects
Registering SSI Unit
Small Scale and ancillary units (i.e. undertaking with investment in plant and machinery of less than Rs. 6.0 million and Rs. 7.5 million respectively) should seek registration with the Director of Industries of the concerned State Government.
The main purpose of Registration is to maintain statistics and maintain a roll of such units for the purposes of providing incentives and support services.
States have generally adopted the uniform registration procedures as per the guidelines. However, there may be some modifications done by States. It must be noted that small industries is basically a state subject. States use the same registration scheme for implementing their own policies. It is possible that some states may have a 'SIDO registration scheme' and a 'State registration scheme'.
Benefits Of Registering
The registration scheme has no statutory basis. Units would normally get registered to avail some benefits, incentives or support given either by the Central or State Govt. The regime of incentives offered by the Centre generally contains the following:
- Credit prescription (Priority sector lending), differential rates of interest etc.
- Excise Exemption Scheme
- Exemption under Direct Tax Laws
- Statutory support such as reservation and the Interest on Delayed Payments Act
(It is to be noted that the Banking Laws, Excise Law and the Direct Taxes Law have incorporated the word SSI in their exemption notifications. Though in many cases they may define it differently. However, generally the registration certificate issued by the registering authority is seen as proof of being SSI).
States/UTs have their own package of facilities and incentives for small scale. They relate to development of industrial estates, tax subsidies, power tariff subsidies, capital investment subsidies and other support. Both the Centre and the State, whether under law or otherwise, target their incentives and support packages generally to units registered with them.
Objectives Of The Registration Scheme
They are summarised as follows:
- To enumerate and maintain a roll of small industries to which the package of incentives and support are targeted
- To provide a certificate enabling the units to avail statutory benefits mainly in terms of protection
- To serve the purpose of collection of statistics
- To create nodal centres at the Centre, State and District levels to promote SSI
Features Of The Scheme
Features of the scheme are as follows:
- DIC is the primary registering centre
- Registration is voluntary and not compulsory.
- Two types of registration is done in all States. First a provisional registration certificate is given. And after commencement of production, a permanent registration certificate is given.
- PRC is normally valid for 5 years and permanent registration is given in perpetuity.
Provisional Registration Certificate (PRC)
- This is given for the pre-operative period and enables the units to obtain the term loans and working capital from financial institutions/banks under priority sector lending.
- Obtain facilities for accommodation, land, other approvals etc.
- Obtain various necessary NOC's and clearances from regulatory bodies such as Pollution Control Board, Labour Regulations etc.
Permanent Registration Certificate
Enables the unit to get the following incentives/concessions:
- Excise exemptions
- Income-Tax exemption and Sales Tax exemption as per State Govt. Policy.
- Incentives and concessions in power tariff etc.
- Price and purchase preference for goods produced.
- Availability of raw material depending on existing policy.
- Application form for Permanent Registration
- Certificate for Permanent Registration
- Appendix A and B
- Affidavit
Procedure For Registration
Features of the present procedures are as follows:
- A unit can apply for PRC for any item that does not require industrial license which means items listed in Schedule-III and items not listed in Schedule-I or Schedule-II of the licensing Exemption Notification. Units employing less than 50/100 workers with/without power can apply for registration even for those items included in Schedule-II.
- Unit applies for PRC in prescribed application form. No field enquiry is done and PRC is issued.
- PRC is valid for five years. If the entrepreneur is unable to set up the unit in this period, he can apply afresh at the end of five years period.
- Once the unit commences production, it has to apply for permanent registration on the prescribed form.
The following form basis of evaluation:
- The unit has obtained all necessary clearances whether statutory or administrative. e.g. drug license under drug control order, NOC from Pollution Control Board, if required etc.
- Unit does not violate any locational restrictions in force, at the time of evaluation.
- Value of plant and machinery is within prescribed limits.
- Unit is not owned, controlled or subsidiary of any other industrial undertaking as per notification.
De-Registration
A Small Scale Unit can violate the regulations in the following ways which will make it liable for de-registration:
- It crosses the investment limits.
- It starts manufacturing any new item or items that require an industrial license or other kind of statutory license.
- It does not satisfy the condition of being owned, controlled or being a subsidiary of any other industrial undertaking.
Labour Laws
The small units manufacturing items reserved for manufacture in small scale sector do not require any prior license. This is a major relaxation where no licensing or restriction in production in small scale sectors exists. The Locational restrictions have also been minimised. Similarly, Labour Act has simplified in 1988 to assist the small establishments. The Act, namely "Labour Laws (exemption from furnishing returns and maintaining registers by certain establishment) Act, 1988" covers labour related acts and thus provides :
- Establishment employing 10-19 persons require to maintain only 3 register and to submit an annual core return only.
- Establishment employing less than 10 persons to maintain only 1 register and submit only an annual core return.
- Only one Inspector will be responsible for various labour laws, except in case of Factory Act and Boiler Act.
- The Labour Minister has also accepted in principle to transform the enforcement of labour laws for SSI's from a regime of regulation to an era of self-discipline and voluntary compliance.
