In this Article, I shall discuss about the Classification of MSME, New MSME Classification criteria, Registration Procedure for new and existing enterprise and Benefits of MSME Registration.

MSME registration shall be known as “UDYAM REGISTRATION”

The MSME Notification passed on 26th June, 2020 will be effective from 1st day of July, 2020 and the link of the same:

1. What are Micro, Small and Medium Enterprises

Under Micro, Small and Medium Enterprises Development(MSMED) Act, 2006, the Micro, Small and Medium Enterprises(MSME) are classified into two categories

1. Manufacturing Enterprises: These are those enterprises which are engaged in the manufacture or production of goods relating to industry specified in the first schedule to the industries(Development and Regulation) Act, 1951) or employment of plant and machinery to add value to the final product.

2. Service Enterprises: The enterprises which are engaged in providing or rendering of services. The categories and are defined in terms of investment in equipment.

2. What are the new criteria for registration Classification under MSME

Ministry of Micro, Small and Medium Enterprises vide its notification dated 1st June read with notification 26th June, 2020 has revised criteria for classification of MSME w.e.f 1st July, 2020

Investment in Plant & Machinery as Equipment and Turnover
Classification Micro Small Medium
Manufacturing & Service Investment<1 Crore And Investment<10 Crores And Investment<50 Crores And
Turnover<5 Crore Turnover<50 Crore Turnover<250 Crores

3. How to become a MSME?

Any person who wants to establish a micro, small or medium enterprise may file Udyam Registration online in the Udyam Registration portal by furnishing self-declaration. There is no requirement to upload documents, papers, certificates or any proof

4. Do existing enterprise require new registration?

  • 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.

5. How to determine category of classification on the basis of investment and turnover?

  • Classification of enterprise shall be done on the basis of composite criteria of investment and turnover.
  • 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.

For instance: In an enterprise having investment of Rs. 4 Crore and Turnover of Rs.5 Crore then in which category enterprise shall fall?

As per the notification, if the investment falls under Small and turnover falls under Micro, then, the enterprise will be placed in the higher category i.e. Small.

  • 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.

i. Calculation of the investment in plant and machinery or equipment

  • Investment in plant and machinery or equipment will be on the basis of the previosy year Income Tax Return
  • In case of new enterprise,
  • the investment will be calculated based on self-declaration of the promoter of the enterprise.
  • Invoice value of a plant and machinery or equipment exluding shall be the basis of self-disclosure
  • When new enterprise files ITR, investment in plant and machinery or equipment shall be on the basis information furnished in 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).

ii. Calculation of Turnover

For calculating the turnover of Micro, small or medium enterprise, export of goods or services or both shall be taken into account

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. MSME Registration Procedure on Udyam Registration portal

The form for registration shall be as provided in the Udyam Registration portal.

There will be no fee for filing Udyam Registration.

Aadhaar number shall be required for Udyam Registration.

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).

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.

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.

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

7. Updation of information by MSME on Udyam Registration portal

  • 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.
  • 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.

8. Transition period due to change in 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 18t April of the financial year following the year in which such change took place

9. Benefits of MSME registration

Under Credit Guarantee Fund Scheme of Micro and Small Enterprises(MSEs), the Government has given collateral-free credit to MSEs. In a recent announcement, the govt has announced 3 lakh crore of credit guarantees to MSMEs which is intended to help MSMEs having 25 crore outstanding loan or less than 100 crore turnover.

1. Business registered under MSME are given higher preference for government license and certification

2. Cheaper bank loans as the interest rate is very low around~1 to 1.5%.

3. It allowed credit for minimum alternate tax(MAT) to be carried forward for up to 15 years instead of 10 years.

4. There are various tax rebates available

5. The expenses incurred for registration of patent and application of ISO certification are reimbursed to these enterprises subject to the limits

6. MSME can avail Bar Code Registration subsidy.

7. Concession in electric bills by making application to Electricity department

8. There is One Time Settlement Fee for non-paid amounts of MSME.

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Location: Kolkata, West Bengal, IN
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One Comment

  1. Suresh says:

    Recently we have taken Udyam Registration Certificate and as per Udyam Certificate our unit falls under Medium Enterprise. What is the maximum time limit to take the payment from customer. Thanks in Advance.

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