Ministry of Micro, Small and Medium Enterprises vide notification dated 26th June, 2020 notifies certain criteria for classifying the enterprises as micro, small and medium enterprises and specifies the form and procedure for filing the memorandum i.e. Udyam Registration with effect from the 1st day of July, 2020.
Article explains about Classification of MSME enterprise, How to become a Micro, small and Medium enterprise, How to compose criteria of investment and turnover for classification, How to Calculate investment in plant and machinery or equipment, How to Calculate Turnover for MSME Calssification, What is a Process of MSME Registration under Udyam Registration Portal, What is a Process of MSME Registration of Existing Enterprises and Updation of information and transition period in classification.
1. Classification of enterprise
- a micro enterprise, where the investment in plant and machinery or equipment does not exceed one crore rupees and turnover does not exceed five crore rupees;
- a small enterprise, where the investment in plant and machinery or equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees; and
- a medium enterprise, where the investment in plant and machinery or equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees.
2. How to become a Micro, small and Medium enterprise
- Any person intends to establish MSME enterprise may file Udyam Registration online in the Udyam Registration portal, based on self-declaration with no requirement to upload documents, papers, certificates or proof.
- After registration, enterprise will receive a Permanent identity number which known as “Udyam Registration Number”.
- E-Certificate i.e. “Udyam Registration Certificate” will be generated after completion of the registration process.
3. How to compose criteria of investment and turnover for classification
- If any enterprise crosses the ceiling limits specified for its present category in either of the two criteria of investment or turnover, then it will cease to exit its current 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.
- 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
4. How to Calculate investment in plant and machinery or equipment,
- Investment in plant and machinery or equipment will be linked to the Income Tax Return (ITR) of the previous years field under the Income Tax Act, 1961.
- In case of new enterprise, no prior ITR was available in that case 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
- Plant and Machinery or equipment shall have the same meaning as mentioned in the Income Tax Rules, 1962 framed under the Income Tax Act, 1961.
- 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 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.
5. How to Calculate Turnover
- 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.
- 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.
- 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.
6. What is a Process of Registration under Udyam Registration Portal
- The form for registration shall be as provided in the Udyam Registration portal.
- No Fees for filing Udyam Registration.
- Aadhar Number is mandatory for registration of followings,
||Types of Enterprise
||Aadhar Number required of Person/Enterprise
||Hindu Undivided Family (HUF).
||Company / Limited Liability Partnership / Cooperative Society / Society / Trust
||Organisation or Authorised Signatory shall provide its GSTIN and PAN Number along with its Aadhar number.
- 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.
- 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.
7. What is a Process of Registration of 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 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 March, 2021.
- An enterprise registered with any other organisation under the Ministry of Micro, Small and Medium Enterprises shall register itself under Udyam Registration
8. Updation of information and transition period in classification
- An enterprise having an 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.
- 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.
- Based on the information furnished or gathered from Government’s sources, including ITR or GST return, the classification of the enterprise will be updated.
- 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.
- In case of an upward change in terms of investment in plant and machinery or equipment or turnover or both, and consequent re-classification, an enterprise will maintain its prevailing status till expiry of one year from the close of the year of registration.
- 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.