The type of investment, size, and output differs among establishments in India. While some businesses operate in the commercial sector, others manufacture items, boost productivity, or offer services or entertainment products. Each of them is governed and controlled by several pieces of government legislation.
If you run a small cake shop or a cake production facility, you must adhere to numerous restrictions. But it’s unclear which law will apply to which establishment.
This article explains how the Udyog Aadhaar Memorandum (UAM) works to register businesses under the State Shop and Establishment Act and the MSMED Act as well as the similarities and differences between the two.
Getting registered under the Shop and Establishment Act
Regardless of the size of their investment in the business, all businesses, including small stores, establishments, dining houses, clubs, hotels, restaurants, or other places of amusement and entertainment, must abide by the general norms and standards set forth in the act.
The act also serves as a guide for the following rules:
- To establish and operate a business from a store or other location in conformity with the applicable State’s legislation. Depending on the entity’s applicable State act, different regulations will apply.
- Should adhere to the act’s stated business requirements for working hours, wage payment, leave/termination policy, terms of employment, holidays, etc.
- To register every single establishment of business in the state, with the exception of those covered by the Factories Act of 1948.
- The certificate of registration must be displayed at the relevant business location, and it must be renewed as needed.
Using Udyog Aadhaar, registration under the MSMED Act
The legislation specifies the minimal requirements for companies to be registered as MSMEs (Micro Small and Medium Enterprises) if they are engaged in the production of goods or the provision of services. In addition to standard business registration, the Udyog Aadhaar Memorandum (UAM) is an identity document given to qualifying MSMEs that streamlines the registration procedure into a few simple steps. Additionally, it enables MSMEs to take advantage of all government-issued credits and perks.
The act also serves as a guide for the following rules:
- If a business meets the requirements of the legislation in terms of investment in plant, machinery, and service equipment, it may register and operate as an MSME.
- To use Udyog Aadhaar to gain from timely released government programs.
- To submit any required business returns as per applicable tax regulations.
In order to receive government-issued advantages for MSMEs, registration under the MSMED Act through the Udyog Aadhaar site chooses to register firms as a particular category being Micro, Small or Medium Enterprises.
See the Difference:
| Difference | Registration under MSMED Act through Udyog Aadhaar | Registration under Shop and Establishment Act |
| 1. Guiding Authority | Central and State government | State government |
| 2. Objective of Registration | To operate the company as a recognised MSME and benefit from programmes offered by the government and agencies for MSMEs. | To define standards and rules for businesses and institutions, such as set working hours, employee benefits, a policy on termination, terms of service, and other requirements |
| 3. Eligibility | To be used by any organisations registered in any type of business structure (LLP, company, etc.), as long as they meet the registration requirements for minimum investment in plant, machinery, and service equipment. | To be used by all businesses engaging in commercial activity, including hotels, clubs, and other amusement and entertainment venues. |
| 4. Applicability of rules | Establishes guidelines and standards solely for organisations that have registered as MSMEs. | Lays forth norms and guidelines for each and every organization engaged in a specific line of employment, including MSMEs. (Excluding those listed under the 1948 Factories Act) |
| 5. Registration formalities | Online application with the necessary documentation and business information. | Submitting fundamental company information and documentation to the district labor officer designated by the state’s labor department. |
| 6. Mandatory or not | Not Mandatory | Mandatory accepting a small number of exceptions. |
| 7. Obtaining licenses | It is generally required for application of: – trademark/copyright/patent – Export licenses – Bank account of the business. – GST registration |
In general, it is not necessary for obtaining any significant licenses, but it is beneficial for opening the company’s current account. |
| 8. Tax Benefits | For entities registered with Udyog Aadhaar, special GST and income tax exemptions are available. | There are no specific tax advantages associated with the issuance of a licence under this act. |
| 9. Renewal Policy | to be renewed every five years by specific organisations. | varies depending on the state’s regulations for businesses. |
Conclusion
The Udyog Aadhaar Memorandum as applied under the MSMED Act provides guidance for the statutory formation and recognition of MSME entities for compliance with and the ability to take advantage of benefits provided by the government for MSMEs. The State Shop Establishment Act licence obtained under it specifies general rules, regulations and duties of all business shops and establishments towards their employees and the provisions therein.
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