In India, the Micro, Small, and Medium Enterprises (MSMEs) sector witnessed rapid growth in recent years. MSMEs are also a major contributor to the country’s social and economic development. The sector has become significant due to its contributions to India’s Gross Domestic Product (GDP) and exports. This sector’s exponential growth has contributed heavily to a rise in entrepreneurship, especially in rural and semi-urban areas of the country.
In light of these developments, classifying different MSMEs has become crucial for data collection, trend analysis, and more. This is where the NIC code comes in. This article delves into NIC codes, different classifications, why they are essential, and more.
What is the NIC Code?
The NIC code’s full form is the National Industrial Classification code. It is a numerical classification that categorises economic activities into multiple different sectors. Initially developed by the Central Statistical Organisation (CSO), this system makes the organisation of industries more manageable, helps in statistical analysis by sector economic research, and aids in formulating policies. NIC codes are also essential for businesses. They allow MSMEs to register themselves, avail of government benefits, and adhere to compliance regulations.
What are the Different NIC Classifications?
The National Industrial Classification Code categorises industries in India into different groups. The major ones include:
– Agriculture, forestry, and fishing industries
– Mining and quarrying
– Manufacturing
– Construction
– Electricity, water, gas, steam, and air conditioning services
– Transport, storage, and communication services
– Wholesale and retail trade; Hotels, Restaurants, and Similar Activities; Repair of Motor Vehicles and Motorcycles;
– Accommodation and food service activities
– Information and communication
– Financial intermediation services, including insurance, real estate, and renting activities
– Administrative and support service activities
– Public administration and defence; Compulsory social security
– Human health and social work
– Arts, entertainment, and recreation
– Activtiies of extraterritorial organisations and bodies
– Real Estate activities, including Renting of Property for Residential purposes; Retail sale through mail order houses or via the Internet, Business enterprises with architectural/technical services; Business enterprises with medical/healthcare servicing; Retail sales in non-specialised stores
What is the NIC Code in Udyam Registration?
Udyam registration refers to a simple online process that allows individuals to register their MSMEs as legal entities easily. It is a free and paperless process. Once the registration is completed, your business will receive an e-certificate called a Udyam registration certificate. This certificate contains a permanent 16-digit registration number.
NIC codes play a significant role in the Udyam registration process. When registering an MSME, business owners must pick the appropriate NIC code that best encompasses their business’s activities. There are several documents and steps to remember when applying for your MSME registration. These are listed below:
1. Apply for NIC code
To apply for an NIC code to register your MSME, the following steps must be followed:
1. Visit the Udyam Registration portal online
2. Fill in the required details, such as your PAN card and Aadhaar card information
3. Choose the NIC code that best matches your business activities
4. Submit your application form to generate the NIC code
5. Once processed, you will receive the registration certificate for your MSME with the NIC code
2. Keep necessary documents ready
The following documents will be necessary when applying for your MSME registration:
– The business owner’s Aadhaar card
– The business’s PAN card
– Proof of the business’s physical address (such as the lease agreement or utility bill)
– Bank statements or cancelled cheques to verify the business’s bank account
– The correct NIC code for your business activity
Why is NIC Code Important?
The NIC code plays a crucial role in MSME registration and tracking. Some important points include:
1. Accurately classifying business activities
Each NIC code’s meaning is representative of a particular industry or sector. They create a standardised framework within which to report any financial or operational information, which helps assess the contributions of different sectors to the economy. This also allows governments to facilitate interventions for industrial development whenever necessary.
2. Statistical analysis and assessment
The NIC code is also useful for statistical purposes. For example, it makes it easier to track the growth and development of MSMEs in different sectors, helping governments understand trends and develop initiatives accordingly.
3. Availing government benefits and subsidies
The NIC code is also a deciding factor in whether businesses receive government benefits or subsidies. The government offers several advantages and subsidies for MSMEs, including concessional loans, tax exemptions, subsidies on electricity bills, and more. However, only specific NIC codes are eligible for these benefits, and MSMEs must present them when availing themselves.
4. MSME Database
The government also utilises NIC codes to create a comprehensive and extensive database of all registered MSMEs in the country. This helps the government connect with them and offer information and support services.
The Bottom Line
The National Industrial Classification (NIC) code plays a key role in the country’s growth and organisation of MSMEs. When starting your MSME, it’s important to be aware of all registration requirements, understand code classifications, and have your documents ready.
Another important aspect of setting up your MSME is financing. If you want to set up your own enterprise, consider an MSME loan from Tata Capital. We offer high loan amounts, flexible tenures, competitive business loan interest rates, and much more! For further details, visit the Tata Capital website or download the app today!
FAQs
The four primary classifications of industry are primary (extraction/agriculture), secondary (manufacturing), tertiary (service sector), and sometimes quaternary/quinary (knowledge, research, and culture).
To find your MSME code, you must visit msmeregistrar.org. The process can be completed online and is necessary for Udyam registration.
To get an NIC number, you must visit the Udyam registration portal, enter the necessary details and documents, select the NIC code that suits your business activities, and submit your application.
18 March 2025
5 mins read
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