EDP Notes

As soon as a person decides to become an entrepreneur and to start a MSME, he is required
to take a number of steps and formalities one after the other. They are as follows:
1) Scanning of Business Environment: it is essential on the part of the entrepreneur to
study and understand the prevailing business environment. Entrepreneur should scan the business
opportunities and threats in the new environment. To study the administrative framework,
procedure, rules and regulations and other formalities implemented by the government. The
potential entrepreneur must assess his own deficiencies, which he can compensate through training.
2) Selection of the Product: The very success of one’s venture will depend on the
rationality of his decision in this regard. The economic viability of the product can be ascertained
by considering certain demand aspects such as volume of demand in the domestic market, volume
of demand in the export market, volume of potential demand, a degree of substitution of an existing
product etc. The prospective entrepreneur has to identify the product based on market research or
market survey.
3) Selection of Form of Ownership: He has to select sole proprietorship or family
ownership or partnership or private limited company as the form of the ownership.
4) Selection of Location and Site: Location is selected after considering certain factors
such as nearness to market, sources of material and labour, modern infrastructure facilities etc. The
entrepreneur has to choose a suitable plot for the factory. He may purchase land directly or choose
from an industrial area developed by State Development Corporations like SIDCO, or Directorate
of Industries. In order to stimulate industrial growth, the government of Kerala is providing
infrastructural assistance by way of
(1). Developing areas.
(2). Development Plots.
(3).Industrial estates, and
(4). Mini industrial units.
5) Designing Capital Structure: Apart from the own capital, he may secure finance from
friends and relatives, term loans from banks and financial institutions.
6) Acquiring Manufacturing Know-How or Technology: Many institutions of
government, research laboratories, research and development divisions of big industries and certain
consultancy agencies provide the manufacturing know-how.
7) Preparation of Project Report: The report usually covers important items like sources
of finance, availability of machinery and technical know-how, sources of raw material and labour,
market potential and overall profitability.
8) Registration as a Small Scale Industry: Registration with Department of industries and
Commerce is only optional. There is no statutory obligation, but small scale industries can avail
various facilities, incentives and concessions offered by the state as well as central government only
if they registered as SSI. The registration would be done in two stages.
 Provisional Registration: It will be valid for one year with possible three extensions of six
months each. It helps entrepreneur to take necessary steps to bring the units into existence. The
provisional registration may enable the party to:
(1) Apply to NSIC/SIDO and other institutions for procuring machines on H.P basis.
(2) Apply for power connection.
(3) Apply to local Bodies for permission to construct the shed to establish a unit.
(4) Apply for financial assistance to SFC/Banks or other financial institutions on the basis of
project report.
(5) Obtain sales tax, excise registration etc whenever required.
(6) Apply for a shed in an industrial estate/ development site in an industrial area/ material for
construction of shed as the case may be.
9) Obtaining Statutory Licence: Any person should obtain the following licences and
certificates before starting the venture:
(A) Licence from Local Bodies For
(1) Construction of the building.
(2) Installation of plant and machinery.
(B) Licence from the Directorate of Factories and Boilers For:
(1) Approval of factory building.
(2) Registration under section 6, 7 and 85 of the Factory Act.
(C) No Objection Certificate from State Pollution Control Board.
10) Apply for Power Connection: There are 2 categories of power, the Low Tension (LT) and
High Tension (HT). A consumer can avail LT only if the connected load is 75 HP and below. If
connected load is between 75 HP and 130 HP, the consumer has the option to avail either LT
supply or HT supply.
11) Arrangement of Finance: Entrepreneur needs to acquire assists of 2 kinds namely Fixed assets
and current assets. Long term finance is needed to acquire fixed assets like land, building, plant and
machinery and for security deposits. Short term funds are required for acquiring current assets.
Current assets are essential for the day to day working of the industry. Long term funds includes
owner’s capital, subsidy from central/ state govt., personal borrowings from friends and relatives
and long term loans from financial institution like KFC and KSIDC.
12) Registration under the Sales Tax Act: Business enterprises are subject to three important
taxes- Income Tax, Excise Duty and Sale Tax. Income tax is levied on income as defined under the
IT Act of 1961. It is revenue of Central Government. Excise duty is a tax levied by the central
Government. It is the duty levied on the cost of goods manufactured within a country. Sales tax is
levied whenever goods are purchased from within the state. When goods are purchased from
outside the state, Central Sales Tax is levied. Application for registration should mention all places
of business dealer including the godown in which the goods are stored. The following papers are to
be submitted for registration.
1) Application for registration in Form 1 duly signed.
2) Counterfoil of challan for Rs. 100 towards registration fees.
3) Return of Estimated Annual Turnover in Form No. 10.
On the basis of declaration of the anticipated turn over and nature of turnover, registering authority
may demand security, which is normally ½ times of the anticipated tax due.
13) Installation of Machinery: Machinery should preferably be installed as per the plant layout.
14) Recruitment of Manpower: The number and type of workers is to be decided. After this, the
required workers should be recruited.
15) Procurement of Raw Material: The raw materials may be procured indigenously or may have
to be imported by the entrepreneur. The next step is to start production, which is taken up in two
stages- Trial production and Commercial production having successfully test marketed the product,
commercial marketing can be undertaken.
16) Application for Permanent Registration: For this, application form has to be made to the GM
of DIC through IEO/ Taluk Industries Officer. The GM should inform the entrepreneur of the date
and time of inspection of the unit. On being satisfied a registration certificate may be issued by the
Directorate of Industries within one month of the receipt of the application. The period of the
certificate whether provisional or permanent will be for a period of 2 years. Renewal certificate
would be affected by the GM (DIC) within a period of 3 months from the date of expiry of
certificate