The Enterprises which are engaged in the manufacture or production, processing or preservation of goods or the enterprises which are engaged in providing or rendering of services, up to a specified limit, are known as Micro or Small or Medium Enterprises, as per their respective limits as given below:
Interpretation
It mean only those enterprises are considered eligible for Udyam Registration which are either in manufacturing or production or processing or preservation of Goods OR in the providing or rendering of services. In other words, the enterprises which are engaging only in trading i.e. buying, selling importing, exporting of Goods are not even eligible for applying for Udyam Registration.
INTRODUCTION OF UDYAM REGISTRATION
In exercise of the powers conferred by sub-section (1) read with sub-section (9) of section 7 and sub-section (2) read with sub-section (3) of section 8, of the Micro, Small and Medium Enterprises Development Act, 2006, (27 of 2006), hereinafter referred to as the said Act, and in supersession of the notifications of the Government of India in the Ministry of Micro, Small and Medium Enterprises number S.O.1702 (E), dated the 1st June, 2020, S.O. 2052 (E), dated the 30th June, 2017, S.O.3322(E), dated the 1st November, 2013 and S.O.1722 (E), dated the 5th October, 2006, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-Section (ii), except as respects things done or omitted to be done before such supersession, the Central Government, after obtaining the recommendations of the Advisory Committee in this behalf, hereby notifies certain criteria for classifying the enterprises as micro, small and medium enterprises and specifies the form and procedure for filing the memorandum (hereafter in this notification to be known as “Udyam Registration”), with effect from the 1st day of July, 2020, namely:–
| Type of Enterprises | Micro Enterprise | Small Enterprise | Medium Enterprise |
| Manufacturing OR Services Sector, Both | Investment upto ₹ 1 Cr
AND Turnover upto ₹ 5 Cr |
Investment upto ₹ 10 Cr
AND Turnover upto ₹ 50 Cr |
Investment upto ₹ 50 Cr
AND Turnover upto ₹ 250 Cr |
Interpretation
The Union Ministry of Micro, Small and Medium Enterprises (MSME) had made the announcement regarding the new process of classification and registration of MSME Enterprises which was launched on July 1, 2020 under the name of ‘Udyam registration’ through a notification on June 26. The MSME Ministry launched a new portal for Udyam Registration-www.udyamregistration.gov.in. The portal will help guide the entrepreneurs step by step as to what they should know, what they should do. The Central Government, after obtaining the recommendations of the Advisory Committee in this behalf, hereby notifies certain criteria for classifying the enterprises as micro, small and medium enterprises as mentioned in the above table.
The above said notification dated 26th June, 2020 suppress all the notifications issued earlier on following dates:
a. Notification No. S.O.1702 (E), dated the 1st June, 2020 – New criteria for classification of Micro, Small and Medium Enterprises
b. Notification No. S.O. 2052 (E), dated the 30th June, 2017 – Mandatory filing of Udyog Aadhaar Memorandum by all MSMEs
c. Notification No. S.O.3322(E), dated the 1st November, 2013 – Extension of the non-tax benefits to Micro, Small and Medium Enterprises for 3 years
d. Notification No. S.O.1722 (E), dated the 5th October, 2006 – The cost of some items are to be excluded while calculating Investment in Plant & Machinery
BASIS OF CALCULATION:
A. Investment In Plant & Machinery or Equipment
1. The calculation of investment in plant and machinery or equipment will be linked to the Income Tax Return (ITR) of the previous years filed under the Income Tax Act, 1961.
2. In case of a new enterprise, where no prior ITR is available, the investment will be based on self-declaration of the promoter of the enterprise and such relaxation shall end after the 31st March of the financial year in which it files its first ITR.
3. The expression “plant and machinery or equipment” of the enterprise, shall have the same meaning as assigned to the plant and machinery in the Income Tax Rules, 1962 framed under the Income Tax Act, 1961 and shall include all tangible assets (other than land and building, furniture and fittings).
4. The purchase (invoice) value of a plant and machinery or equipment, whether purchased first hand or second hand, shall be taken into account excluding Goods and Services Tax (GST), on self-disclosure basis, if the enterprise is a new one without any ITR.
5. The cost of certain items specified in the Explanation I to sub-section (1) of section 7 of the Act shall be excluded from the calculation of the amount of investment in plant and machinery.
B. Turnover
1. Exports of goods or services or both, shall be excluded while calculating the turnover of any enterprise whether micro, small or medium, for the purposes of classification.
2. Information as regards turnover and exports turnover for an enterprise shall be linked to the Income Tax Act or the Central Goods and Services Act (CGST Act) and the GSTIN.
3. The turnover related figures of such enterprise which do not have PAN will be considered on self-declaration basis for a period up to 31st March, 2021 and thereafter, PAN and GSTIN shall be mandatory.
C. Composite criteria of investment & Turnover for classification
1. A composite criterion of investment and turnover shall apply for classification of an enterprise as micro, small or medium.
2. If an enterprise crosses the ceiling limits specified for its present category in either of the two criteria of investment or turnover, it will cease to exist in that category and be placed in the next higher category but no enterprise shall be placed in the lower category unless it goes below the ceiling limits specified for its present category in both the criteria of investment as well as turnover.
3. All units with Goods and Services Tax Identification Number (GSTIN) listed against the same Permanent Account Number (PAN) shall be collectively treated as one enterprise and the turnover and investment figures for all of such entities shall be seen together and only the aggregate values will be considered for deciding the category as micro, small or medium enterprise.
Interpretation
The amount of investment in plant and machinery or equipment as filled in Udyam Registration Portal should be same as filled in the Income Tax Return (ITR) of the previous year filed under the Income Tax Act, 1961. In case of a new enterprise, where no prior ITR is available, the investment will be based on self-declaration of the promoter of the enterprise and such relaxation shall end after the 31st March of the financial year in which it files its first ITR.
The expression “plant and machinery or equipment” of the enterprise, shall have the same meaning as assigned to the plant and machinery in the Income Tax Rules, 1962 framed under the Income Tax Act, 1961 and shall include all tangible assets (other than land and building, furniture and fittings).
The purchase (invoice) value of a plant and machinery or equipment, whether purchased first hand or second hand, shall be taken into account excluding Goods and Services Tax (GST), on self-disclosure basis, if the enterprise is a new one without any ITR.
The cost of certain items i.e. the cost of pollution control, research and development, industrial safety devices and such other items as specified in the Explanation I to sub-section (1) of section 7 of the Act shall be excluded from the calculation of the amount of investment in plant and machinery.
Exports of goods or services or both, shall be excluded while calculating the turnover of any enterprise whether micro, small or medium, for the purposes of classification.
The amount of turnover as filled in Udyam Registration Portal should be same as filled in the Income Tax Return the GST Return of the previous year. The turnover related figures of such enterprise which do not have PAN will be considered on self-declaration basis for a period up to 31st March, 2021 and thereafter, PAN and GSTIN shall be mandatory.
A composite criterion of investment and turnover shall be applicable. It means If an enterprise crosses the ceiling limits specified for its present category in either of the 2 criteria of investment or turnover, it will cease to exist in that category and be placed in the next higher category but no enterprise shall be placed in the lower category unless it goes below the ceiling limits specified for its present category in both the criteria of investment as well as turnover.
Illustration: If an enterprise is having its investment in plant and machinery for an amount of Rs. 9 crore and also having turnover of Rs. 45 crore. In this case, the enterprise shall be classified as a ‘Small Enterprise’. Suppose, its turnover is increase more than Rs. 50 crore but investment in plant and machinery remains same to Rs. 9 crore. In that case, its category as Small Enterprise will cease to exist and will shifted in the next higher category i.e. as a ‘Medium Enterprise’. But please note that in the said, if turnover is decrease to Rs. 4.5 crore (which is below Rs. 5 crore), the enterprise shall not be shifted to lower category i.e. as Micro Enterprise unless the investment in plant and machinery is also reduced below Rs. 1 crore.
BENEFITS ON GETTING REGISTERED AS UDYAM:
- Udyam registration helps in getting government tenders
- Due to the Udyam, the bank loans become cheaper as the interest rate is very low (Upto 1.5% lower than interest on regular loans
- There are various tax rebates available for Udyam
- Becomes easy to get licenses, approvals and registrations, irrespective of field of business as business registered under Udyam are given higher preference for government license and certification.
- They get easy access to credit in lower interest rates
- Registered Udyams gets tariff subsidies and tax and capital subsidies
- Once registered the cost getting a patent done, or the cost of setting up the industry reduces as many rebates and concessions are available.
Interpretation
By getting registered under Udyam Registration Portal, the enterprises will get preference while issuing Government tenders, get benefits of financial assistance at lower interest rates, tax rebates and many other privileges as well as exemptions.
PROCESS AND DOCUMENTATION OF GETTING REGISTERATION AS UDYAM:
1. The form for registration shall be as provided in the Udyam Registration portal.
2. There will be no fee for filing Udyam Registration.
3. Aadhaar number shall be required for Udyam Registration.
4. The Aadhaar number shall be of the proprietor in the case of a proprietorship firm, of the managing partner in the case of a partnership firm and of a karta in the case of a Hindu Undivided Family (HUF).
5. In case of a Company or a Limited Liability Partnership or a Cooperative Society or a Society or a Trust, the organisation or its authorised signatory shall provide its GSTIN and PAN along with its Aadhaar number.
6. In case an enterprise is duly registered as an Udyam with PAN, any deficiency of information for previous years when it did not have PAN shall be filled up on self-declaration basis.
7. No enterprise shall file more than one Udyam Registration: Provided that any number of activities including manufacturing or service or both may be specified or added in one Udyam Registration.
8. Whoever intentionally misrepresents or attempts to suppress the self-declared facts and figures appearing in the Udyam Registration or updation process shall be liable to such penalty as specified under section 27 of the Act.
(Some special points for Existing enterprises)
- All existing enterprises registered under EM–Part-II or UAM shall register again on the Udyam Registration portal on or after the 1st day of July, 2020.
- All enterprises registered till 30th June, 2020, shall be re-classified in accordance with this notification.
- The existing enterprises registered prior to 30th June, 2020, shall continue to be valid only for a period up to the 31st day of March, 2021.
- An enterprise registered with any other organisation under the Ministry of Micro, Small and Medium Enterprises shall register itself under Udyam Registration.
Interpretation
For New Enterprises, Aadhaar number shall be required for Udyam Registration, of the proprietor in the case of a proprietorship firm; of the managing partner in the case of a partnership firm; of a karta in the case of a Hindu Undivided Family (HUF); of authorised signatory in case of a Company or a Limited Liability Partnership or a Cooperative Society or a Society or a Trust.
There is an additional requirement in case of a Company / LLP / Cooperative Society / Society / Trust that its authorised signatory shall provide GSTIN and PAN of the Company / LLP / Cooperative Society / Society / Trust along with his own Aadhaar number.
Whoever intentionally misrepresents or attempts to suppress the self-declared facts and figures appearing in the Udyam Registration or updation process, shall be punishable—
a. in the case of the first conviction, with fine which may extend to rupees one thousand; and
b. in the case of any second or subsequent conviction, with fine which shall not be less than rupees one thousand but may extend to rupees ten thousand.
For Existing Enterprises, All existing enterprises registered under EM–Part-II or UAM shall register again on the Udyam Registration portal on or after the 1st day of July, 2020. Those enterprises which are already registered till 30th June, 2020, shall be re-classified in accordance with this notification and those enterprises which are registered prior to 30th June, 2020, shall continue to be valid only for a period up to the 31st day of March, 2021. Therefore, the due-date for getting registration under Udyam Registration Portal for existing enterprise id 31st March, 2021.
UPDATION OF INFORMATION AND TRANSITION PERIOD IN CLASSIFICATION
1. An enterprise having Udyam Registration Number shall update its information online in the Udyam Registration portal, including the details of the ITR and the GST Return for the previous financial year and such other additional information as may be required, on self-declaration basis.
2. Failure to update the relevant information within the period specified in the online Udyam Registration portal will render the enterprise liable for suspension of its status.
3. Based on the information furnished or gathered from Government’s sources including ITR or GST return, the classification of the enterprise will be updated.
4. In case of graduation (from a lower to a higher category) or reverse-graduation (sliding down to lower category) of an enterprise, a communication will be sent to the enterprise about the change in the status.
5. In case of an upward change in terms of investment in plant and machinery or equipment or turnover or both, and consequent reclassification, an enterprise will maintain its prevailing status till expiry of one year from the close of the year of registration.
6. In case of reverse-graduation of an enterprise, whether as a result of re-classification or due to actual changes in investment in plant and machinery or equipment or turnover or both, and whether the enterprise is registered under the Act or not, the enterprise will continue in its present category till the closure of the financial year and it will be given the benefit of the changed status only with effect from 1st April of the financial year following the year in which such change took place
Interpretation
An enterprise having Udyam registration Number (URN) shall have to update its information on Udyam Registration Portal, including the details of ITR and GST returns for the previous year. In case enterprise fails in providing information to Udyam Portal, then it may lead to suspension of its status. Based on the information filed by the enterprise, the classification of the enterprises will be updated and a communication in change of classification will be sent to the enterprise.
FACILITATION AND GRIEVANCE REDRESSAL OF ENTERPRISES
1. The Champions Control Rooms functioning in various institutions and offices of the Ministry of Micro, Small and Medium Enterprises including the Development Institutes (MSME-DI) shall act as Single Window Systems for facilitating the registration process and further handholding the micro, small and medium enterprises in all possible manners.
2. The District Industries Centers (DICs) will also act as Single Window facilitation Systems in their Districts.
3. Any person who is not able to file the Udyam Registration for any reason including for lack of Aadhaar number, may approach any of the above Single Window Systems for Udyam Registration purposes with his Aadhaar enrolment identity slip or copy of Aadhaar enrolment request or bank photo pass book or voter identity card or passport or driving license and the Single Window Systems will facilitate the process including getting an Aadhaar number and thereafter in the further process of Udyam Registration.
4. In case of any discrepancy or complaint, the General Manager of the District Industries Centre of the concerned District shall undertake an enquiry for verification of the details of Udyam Registration submitted by the enterprise and thereafter forward the matter with necessary remarks to the Director or Commissioner or Industry Secretary concerned of the State Government who after issuing a notice to the enterprise and after giving an opportunity to present its case and based on the findings, may amend the details or recommend to the Ministry of Micro, Small or Medium Enterprises, Government of India, for cancellation of the Udyam Registration Certificate.
Interpretation
Any person who is not able to file the Udyam Registration for any reason including for lack of Aadhaar number, may approach any of the above Single Window Systems for Udyam Registration purposes with his Aadhaar enrolment identity slip or copy of Aadhaar enrolment request or bank photo pass book or voter identity card or passport or driving license and the Single Window Systems will facilitate the process including getting an Aadhaar number and thereafter in the further process of Udyam Registration.
In case of any discrepancy or complaint, the General Manager of the District Industries Centre of the concerned District shall undertake an enquiry for verification of the details of Udyam Registration submitted by the enterprise and thereafter forward the matter with necessary remarks to the Director or Commissioner or Industry Secretary concerned of the State Government who after issuing a notice to the enterprise and after giving an opportunity to present its case and based on the findings, may amend the details or recommend to the Ministry of Micro, Small or Medium Enterprises, Government of India, for cancellation of the Udyam Registration Certificate.
Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the authors whatsoever and the content is to be used strictly for educative purposes only.
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