Whenever someone starts a small or medium-sized enterprise(MSME) in India, they are first advised to register for Udyam registration. However, one thing in this registration process often confuses people- the NIC code. Many people think that the NIC code is just a formality, but the truth is that it defines the identity of your entire business.
What is an NIC code?
NIC stands for National Industrial Classification Code. It is a standardised coding system created by the government of India, used to classify the economic activity of any business.
Whether you are involved in manufacturing, providing services, or trading, a different NIC Code is assigned to each type of business.
What is the Importance of the NIC code?
It is used by the majority of Indian government departments to guarantee that businesses are classified correctly. Further, it’s used to maintain track of a business’s commercial activities.
To obtain a Udyog Aadhaar for the purpose of registering a corporation or a Limited Liability Partnership (LLP)
Once your company has NIC registered, you may easily take advantage of all government benefits.
If you’ve signed up for NIC, make sure to mention it in all of your invoices so the government can keep track of your firm.
Why is an NIC Code necessary?
The NIC Code is not just a formal government requirement; it serves several important functions.
- 1. It accurately identifies your business.
The NIC Code clearly defines the type of activity your business engages in.
For example:
- If you do mobile phone repairs
- Or provide digital marketing services
- Or trade in clothing
Each of these activities has a different NIC Code. Choosing the correct NIC Code makes it easier for both the government and banks to understand which sector your business belongs to
- Mandatory for MSME/Udyam Registration
Choosing an NIC Code is mandatory when registering for Udyam Registration. You cannot complete the registration without an NIC Code.
- This determines whether your business falls under Manufacturing, Service, or Trading.
- Based on this, your MSME category (Micro, Small, or Medium) is correctly determined.
Entering an incorrect NIC Code may result in your business profile being considered inaccurate in the future.
- Helps in Availing Government Schemes and Subsidies
The government runs several schemes for MSMEs, such as:
- Subsidies
- Interest rate rebates on loans
- Scheme-based assistance
However, all these schemes are provided based on the sector determined by the NIC Code.
If your NIC Code is incorrect:
- You may not be considered eligible for the correct scheme
- Or your application may be rejected
- Plays a Key Role in Bank Loans and Financing
When you apply for:
- Business loans
- Mudra loans
- Or financing from any government bank
- The risk level of that sector
- And whether your activity aligns with the bank’s policies
- A correct NIC Code increases the chances of loan approval.
- Essential for Future Business Updates and Growth
Let’s say today you are only providing services, but in the future:
- You start manufacturing
- Or add a new service
You can add a new NIC Code to your Udyam Registration.
This accurately reflects your business growth in government records.
The Role of NIC Code in Udyam Registration
- Defines the business identity-The NIC Code indicates the type of activity your business engages in.
- Mandatory for Udyam Registration-Udyam Registration cannot be completed without an NIC code.
- Indicates primary and secondary activities- Helps in clearly distinguishing between primary and secondary business activities.
- Assists in determining MSME category-Ensures accurate classification as Micro, Small, or Medium enterprise.
- Determining eligibility for government schemes- The correct NIC code is essential for availing subsidies and schemes.
- Simplifies the bank loan process – Provides banks with clear information about your business sector.
- Useful for future business updates – The NIC Code can be updated when adding new business activities.
Why is an NIC Code essential for future business updates and growth? (Points)
- Helps in adding new activities – A new NIC Code can be easily added as the business grows.
- Keeps government records updated – Accurate business information is maintained with the government.
- Reflects expansion – The introduction of new services or manufacturing activities receives official recognition.
- Increases eligibility for plans – Helps in availing benefits from new government schemes.
- Builds trust with banks and investors – An updated NIC Code strengthens the business profile.
- Simplifies legal and documentation processes – Prevents difficulties in future verifications.
Conclusion
The NIC Code is a crucial part of business registration, ensuring the correct identification of your business. Choosing the right NIC Code makes processes such as MSME Certificate classification, availing government schemes, securing bank loans, and future business growth easier and more transparent. Therefore, it is essential to carefully consider your choice of NIC Code when registering your business
