The Ministry of Micro, Small and Medium Enterprises (MSME) vide its Notification dated 26th June, 2020 has notified certain criteria for classification of an enterprises in MSME category.

Under this classification, an enterprises shall be classified as 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.

An enterprises whose investment in plant and machinery or equipment exceeds one crore rupees but up to ten crore rupees and whose turnover exceed five crore rupees but up to fifty crore rupees, then such enterprise shall be classified as Small Enterprise.

And where an enterprise whose investment in plant and machinery or equipment exceeds ten crore rupees but up to fifty crore rupees and whose turnover exceed fifty crore rupees but up to two hundred and fifty crore rupees, then such enterprise shall be classified as Medium Enterprise.

Note 1: In case where an enterprise crosses the ceiling limits of either of the two criteria of turnover and investment for existing category, then in such case enterprise will cease to exist in that category and placed in the next higher category according to the criteria of investment and turnover. However, enterprise shall be placed in lower category only if both the criteria of investment and turnover will fulfilled.

Note 2: All units having same PAN number but having different GSTIN number shall be collectively treated as a single enterprise and the limit of turnover and investment shall be seen in aggregative for deciding the category as micro, small or medium enterprise.

Application for Udyam Registration:

For applying as Micro, Small or Medium Enterprises, one needs to apply online based on the self-declaration with no requirement to upload any document for the Udyam registration on Udyam Registration Portal. On successful registration, an enterprise will be assigned a permanent identity number to be known as “Udyam Registration Number” and an e-certificate namely, “Udyam registration Certificate” 

Calculation of value of Investment for Udyam Registration:

The value of investment in plant and machinery or equipment will be linked to the Income Tax Return filed for the previous year under Income Tax Act, 1961. In case of new incorporated entity, value of plant of machinery or equipment will be based on the self-declaration of the promoter of the entity.

In case of purchase of any plant and machinery or equipment, purchase value [exc. GST] will be considered for the value of investment.

The expression “Plant & Machinery or Equipment” of the enterprise shall have the same meaning as assigned to the plant and machinery in Income Tax Rules, 1962 as framed under Income Tax Act, 1961 and shall include all tangible assets (other than land and building and furniture and fittings).

Calculation of turnover for Udyam Registration:

For the purpose of calculating turnover of an enterprise for the purpose of classification, all information shall be linked with GSTN portal or Income Tax portal and the value of export will be excluded from the total turnover of the enterprise.

Udyam Registration Process:

Udyam registration is completely an online process through Udyam Registration Portal, where no registration fees is payable.

Aadhar Number of the appropriate person [Managing partner in case of partnership firm] is mandatorily required for filing registration form.

In case of company, LLP or Co-operative Society or Trust, its authorized signatory shall provide GSTN, PAN and his Aadhaar Number.

Note: In case where an enterprise is indulge in more than one type of business or services or both, then such business of services can be specified or added in one Udyam Registration. [Separate registration is not required]

Udyam Registration of existing enterprises:

All the existing enterprises registered as EM-Part II [Entrepreneurs Memorandum] or as UAM [Udyog Aadhar Memorandum] shall have to register again on or after 1st July, 2020. And all enterprise registered prior to 1st July, 2020 shall be reclassified in accordance to new criteria and their existing registration certificate is valid upto 31st March, 2021.

Updation of information and transition period in classification:

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 Potal, 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.

Author Bio

Qualification: CA in Practice
Company: Shah Gupta & Co.
Location: Mumbai, Maharashtra, IN
Member Since: 29 Jun 2020 | Total Posts: 1
CA Bharat P. Vasani is a senior partner in Shah Gupta & Co (SGC) Category- I Accountancy Firm, established in the year 1976. The Firm renders quality services in the areas of Audit & Assurance, taxation, financial and management consultancy, regulatory compliances and business valuations since la View Full Profile

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7 Comments

  1. Priya Ranglani says:

    I want to addregistered my client on Udyam and forgot to add a business activity. Now, I want to add the same. Kindly guide me

  2. Kumar M Kulkarni says:

    Sir.
    It is mentioned that in case of New UNIT the cost of plant and machinery shall be purchase price less Gst if any
    However in case of existing UNIT whether value of plant and machinery is to be considered at Gross Block (Purchase price) or at WDV

    1. Bharat Vasani says:

      Value of plant & machinery is as per Income tax Rules. Moreover it refers to purchase price, hence it has to be original cost, not WDV. It will include all capitalised items as per Income tax Rules.

  3. Anuj Singh says:

    I want to clear one thing, we are Ltd company and our tornover 73 crore and investment is 4 crore in last balance sheet amount.
    So please guide where we fall in msme registration, micro, small, medium.
    Please advise.

  4. CMADILIP says:

    Sir,It is a nice article giving extensive coverage of latest changes affecting MSMES.In the above article,it is mentioned that investment in Plant and Machinery will be calculated with reference to Previous ITR filed.I have specific query whether it Gross Block or W.D.V.Please provide your valuable guidance.

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