MSME Udyam Registration – Calculation & Benefits

I] An understanding on MSME:

MSMEs are an important sector for the Indian economy and have contributed immensely to the country’s socio-economic development by generating employment opportunities and development of entrepreneurship.

Categorization of MSMEs to be based on composite criterion of Investment and turnover, same is as under (w.e.f. July 01 2020):

Guidance on calculation of investment in plant and machinery or equipment

• The calculation of investment in plant and machinery or equipment will be linked to the Income Tax Return (ITR) of the previous year filed under Income Tax Act, 1961.
• In case on 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 31^st March of the financial year in which it files its first ITR.
• For further clarification, calculating the investment in plant and machinery, the cost of pollution control, research and development, industrial safety devices and such other items as may be specified, by notification, shall be excluded.

Guidance on calculation of Turnover

• 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.
• 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 turnover related figures of such enterprise which do not have PAN will be considered on
  self-declaration basis for a period up to 31 March 2021 and thereafter, PAN and GSTIN shall be mandatory.

II] UDYAM Registration of enterprises

• The registration is completed online on the basis of self-declaration. Form for registration is available on the Udyam Registration portal- https://udyamregistration.gov.in/Government-India/Ministry-MSME-registration_.htm.
• Currently the registration is divided into following:
• For the new entrepreneurs who are not registered as MSME or those with EM- II.
• For those who already having registration as UAM.
• There is no fee payable for filing Udyam Registration.
• Following are the requirements for registration:
• Aadhar Number
• Sole Proprietary – Aadhar would be of the Proprietor;
• Partnership firm – Aadhar would be of the Managing Partner;
• Hindu Undivided Family (HUF) – Aadhar would be of the Karta;
• Company, trust, society, Limited Liability Partnership (LLP), or Cooperative society – Aadhar would be of the Authorised Signatory
• Social category of the authorised person.
• Name and type of the enterprise (Type – Proprietary/ Partnership firm/ Company etc).
• PAN of the enterprise
• Registered Business Address
• Plant Name and Address (if any)
• Bank Details (Bank Name, Bank Account Number, IFSC Code)
• Date of Incorporation and Date of commencement of business
• Number of employees (Male, Female and others)
• National Industry Classification Code (NIC Code) basis the activity of the enterprise
• Amount of Investment in Plant and Machinery or Equipment
• Amount of Turnover
• Once all the requisite details are filled and after successful registration, a Reference Number will get generated using which, the Udyam Certificate can be saved / downloaded.

Note: As per notification dated 26 June 2020 issued by the Ministry of MSMEs, all the existing enterprises registered prior to 30 June 2020, shall be re-classified as per composite criterion of Investment and turnover for classification of an enterprise as a micro, small or medium enterprise. All such existing enterprises shall register themselves under Udyam Registration. The existing enterprises registered prior to 30 June 2020, shall continue to be valid only for a period up to 31 March 2021.

III] Benefits of MSME Udyam Registration

Following is an illustrative list of benefits available to enterprises registered as MSME:

• Protection Against Delayed Payments

If a buyer delays, the payment for more than 45 days, the enterprise (i.e. Micro and Small Enterprises) is eligible to charge compound interest.

• Subsidy on patent registration

Business enterprises registered under the MSME Act are given a subsidy for patent registration. This can be availed by sending an application to the respective ministry.

• Concession on Electricity

MSME can avail the concession on electricity bill, by submission an application and copy of registration Certificate.

• Overdraft Interest Rate Exemption

Enterprises registered under MSME can avail a benefit of 1% on the Overdraft as mentioned in a scheme that differs from bank to bank.

• ISO Certification Charges Reimbursement

The registered MSME enterprises can claim the reimbursement of the expenses that were spent for the ISO certification.

Disclaimer- Every effort is made to avoid error or omission in the article. It is suggested to cross check all the facts, law and content with original government publication/notification. This article is for information purpose and not a formal opinion. No one should act on such information without appropriate professional advice.