Micro Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. MSMEs not only play crucial role in providing large employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural & backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income and wealth. MSMEs are complementary to large industries as ancillary units and this sector contributes enormously to the socio-economic development of the country.
The Micro, Small and Medium Enterprises Development (MSMED) Act was notified in 2006 to address policy issues affecting MSMEs as well as the coverage and investment ceiling of the sector. The Act seeks to facilitate the development of these enterprises as also enhance their competitiveness. It provides the first-ever legal framework for recognition of the concept of “enterprise” which comprises both manufacturing and service entities. It defines medium enterprises for the first time and seeks to integrate the three tiers of these enterprises, namely, micro, small and medium.
The primary responsibility of promotion and development of MSMEs is of the State Governments. However, the Government of India, supplements efforts of the State Governments through various initiatives. The role of the M/o MSME and its organizations is to assist the States in their efforts to encourage entrepreneurship, employment and livelihood opportunities and enhance the competitiveness of MSMEs in the changed economic scenario.
2. OVERVIEW OF THE SSI/MSME SECTOR
2.1 Prior to implementation of MSMED Act, 2006, the sector was defined, as per the provision of Industrial Development and Regulation (IDR) Act 1951, as Small Scale Industries (SSI) sector and its constituent tiny and auxiliary units as per periodic revision of criteria for defining such units. The scope and coverage of the MSME sector were broadened significantly under the MSMED Act, 2006, which recognized the concept of “enterprise” and to include both manufacturing and services sectors, besides defining the medium enterprises under MSME Sector. Thus, the entire non-agricultural sector of economy was brought under the coverage of MSME Sector subject to the revised criteria prescribed for defining Micro, Small and Medium Enterprises separately for manufacturing and services sectors.
2.2 In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified in two Classes:
(a) Manufacturing Enterprises – The enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the industries (Development and regulation) Act, 1951) or employing plant and machinery in the process of value addition to the final product having a distinct name or character or use. The Manufacturing Enterprise is defined in terms of investment in Plant & Machinery.
(b) Service Enterprises: The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment.
2.3 The limit for investment in plant and machinery/equipment for manufacturing / service enterprises are as under:
|Enterprises||UAM CATEGORY||Type||Investment in plant & machinery/equipment|
|Micro Enterprises||A||Manufacturing||Does not exceed 25 lakh rupees|
|D||Service||Does not exceed 10 lakh rupees|
|Small Enterprises||B||Manufacturing||More than 25 lakh rupees but does not exceed 5 crore rupees|
|E||Service||More than 10 lakh rupees but does not exceed 2 crore rupees|
|Medium Enterprises||C||Manufacturing||More than 5 crore rupees but does not exceed 10 crore rupees|
|F||Service||More than 2 crore rupees but does not exceed 5 crore rupees|
2.4 Ministry of Micro Small and Medium Enterprises (M/o MSME) envisions a vibrant MSME sector by promoting growth and development of the MSME Sector, including Khadi, Village and Coir Industries, in cooperation with concerned Ministries/Departments, State/UT Governments and other Stakeholders, through providing support to existing enterprises and encouraging creation of new enterprises.
3. Entrepreneurs Memorandum (EM-I &II)
Subsequent to the implementation of Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 with effect from October 2006, filing of Entrepreneurs Memorandum Part I and II came into vogue for proposed and existing enterprises respectively. As per the provisions of the said Act, filing of EM-I was discretionary in nature. However, MSMEs file EM-II at District Industries Centers (DICs) in respective States/UTs, after commencement of the project.
Trends in MSME Growth (Filing of EM-II)
The MSME sector has shown consistent growth during 2007-2015 in terms of number of EM-II filed with the District Industries Centers across the country. The National Portal with only 14 States and UTs on-board has shown a significant improvement in online filing of EM-I and EM-II within a short time that further proves that there is a need for a hassle free eco-system of registration that may lead towards formalization of economy.
4. Universalization of Registration
The present registration process of EM has also been commented by the Kamath Committee. “The major issue lies not with the registration process as per the MSMED Act, 2006 but with the conditions applied by the local DICs. There are localized rules and requirements which could vary even from district to district within the same state, which may result in delays in receiving the EM II acknowledgement”. The Committee suggests the following measures to minimize such delays:
4.1 Deemed acceptance of registration (EM II) within pre-defined time frame. This could be a time period of one week from the filing of the online registration form. Since the form is proposed for self-declaration clause, all requisite verification can be done by the DICs subsequent to acceptance.
4.2 Since procedures like land allotment which are under the state governments entail collection of information, it is suggested that no conditions should be imposed by the state government/DICs for acceptance of registration.
4.3 The requirement of no-objection certificate with relation to pollution norms can be discontinued. This activity is already been carried out by the Pollution Control Department and the self-declaration by the MSME can be suitably worded to cover this aspect. If necessary, a negative list for industries where pollution certificate is required may be prepared.
4.4 A mobile application with an easy-to-use interface should be used to augment the registration process. Registration can be encouraged by providing incentives for registering with the authority which could include benefits such as insurance for a nominal fee or free of cost, credit ratings for MSMEs at low rates and tax holiday for a limited time period. It may be useful to have a basic form such that 95% of MSMEs including most micro enterprises are eligible for a single-form based basic registration/facilitation and a full form is needed only for the remaining 5% MSMEs. Even for these 5% MSMEs, the form should be simplified and based on self-certification with follow on validation by industry associations certified by the Authority on the lines of the BMO model in Germany, as detailed later in this chapter. The facility can be extended to have the ability to open a bank account entirely online using eKYC (electronic validation of KYC requirement).
5. Udyog Aadhaar Memorandum
As per the recommendations made by Kamath Committee, the Ministry of MSME, in consultation with the National Board of MSMEs and the Advisory Committee in this behalf, has prepared a one-page registration form that would constitute a self- declaration format under which the MSME will self-certify its existence, bank account details, promoter/owner’s Aadhaar details and other minimum basic information required. Based on the same, the MSMEs can be issued online, a unique identifier i.e. Udyog Aadhaar Number.
The Ministry of MSME has set up the infrastructure i.e. the Udyog Aadhaar (UA) Portal (http://udyogaadhaar.gov.in) for online filing of Udyog Aadhaar Memorandum (UAM) by enterprises located anywhere in the country. The UA portal is also accessible on mobile devices. The procedure for filing Udyog Aadhaar Memorandum has been notified (refer Appendix).
6. Benefits of filing Udyog Aadhaar Memorandum
Udyog Aadhaar registration will enable the units/enterprises to seek information and apply online about various services being offered by all Ministries and Departments.
Earlier only medium enterprises were insisted to file EM2 as it was very cumbersome to file, the simplified Udyog Aadhaar will enable all
enterprises to file and register themselves so that simply by using Udyog Aadhaar Number, they can access other services.
The process of obtaining Udyog Aadhaar Number is free-of cost, paperless and results in instant registration.
7. Guidelines for Filing the Online Udyog Aadhaar Form
a. Aadhaar Number – 12 digit Aadhaar number issued to the applicant should be filled in the appropriate field.
b. Name of Owner- The applicant should fill his/her name strictly as mentioned on the Aadhaar Card issued by UIDAI. E.g. if Raj Pal Singh has his name as Raj P. Singh, the same should accordingly be entered if the name does not match with the Aadhar Number, the applicant will not be able to fill the form further.
c. To Validate Aadhar:-
d. Validate Aadhar- The applicant must click on Validate Aadhaar button for verification of Aadhaar, after that only user can fill the form further.
e. Reset- The applicant can click on reset button to clear the field of Aadhaar No and Name of the owner for different Aadhaar.
f. Social Category- the Applicant may select the Social Category (General, Scheduled Caste, Scheduled Tribe or Other Backward Castes (OBC). The proof of belonging to SC, ST or OBC may be asked by appropriate authority, if and when required.
g. Name of Enterprise- the Applicant must fill the name by which his/her Enterprise is known to the customers/public and is a legal entity to conduct business.One applicant can have more than one enterprises doing business and each one can be registered for a separate Udyog Aadhaar and with the same Aadhaar Number as Enterprise 1 and Enterprise 2 etc.
h. Type of Organization- the Applicant may select from the given list the appropriate type of the organization for his/her enterprise. The Applicant must ensure that he/she is authorized by the legal entity (i.e. enterprise being registered for Udyog Aadhaar) to fill this online form. Only one Udyog Aadhaar number shall be issued for each enterprise.
i. Postal Address- the Applicant should fill in the appropriate field the complete postal address of the Enterprise including State, District, Pin code, Mobile No and Email.
j. Date of Commencement- The date in the past on which the business entity commenced its operations may be filled in the appropriate field.
k. Previous Registration Details(if any)- If the Applicant’s enterprise, for which the Udyog Aadhaar is being applied, is already issued a valid EMI/II by the concerned GM (DIC) as per the MSMED Act 2006 or the SSI registration prevailing prior to the said Act, such number may be mentioned in the appropriate place.
l. Bank Details- the Applicant must provide his/her bank account number used for running the Enterprise in the appropriate place. The Applicant must also provide the IFS Code of the bank’s branch where his/her mentioned account exists. The IFS code is now a days printed on the Cheque Books issued by the bank. Alternatively, if the Applicant knows the name of the Bank and the branch where his/her account is there, the IFSC code can be found from website of the respective Bank.
m. Major Activity- The major activity i.e. either “Manufacturing” or “Service” may be chosen by the enterprise for Udyog Aadhaar.
n. NIC Code- the Applicant may choose as appropriate National Industrial Classification-2008 (NIC) Code for the selected “Major Activity”. The NIC codes are prepared by the Central Statistical Organisation (CSO) under the Ministry of Statistics and Program implementation, Government of India..
o. Person employed- The total number of people who are directly been paid salary/ wages by the enterprise may be mentioned in the appropriate field.
p. Investment in Plant & Machinery / Equipment- While computing the total investment, the original investment (purchase value of items) is to be taken into account excluding the cost of pollution control, research and development, industrial safety devices, and such other items as may be specified, by notification of RBI. If an enterprise started with a set of plant and machinery purchased in 2008 worth Rs. 70.00 lakh has procured additional plant and machinery in the year 2013 worth Rs. 65.00 lakh, then the total investment in Plant & Machinery may be treated as Rs. 135.00 lakh.
q. DIC- the Applicant, based on the location of the Enterprise, has to fill in location of DIC. This Column will be active and show option only when there are more than one DIC in the district. In fact if there is only one DIC in the district system will automatically register you in the same DIC.
r. Submit- The Applicant must click on Submit button to generate acknowledgment number.
(i) Having Aadhaar Number is not mandatory for registering an MSME under Udyog Aadhaar.
The Udyog Aadhaar Registration can be done online by individuals themselves in case they have an Aadhaar number. However, in all exceptional cases, including those of not having Aadhaar number, can still file Udyog Aadhaar Memorandum ,in offline mode(i.e. on paper form), with the General Manager(GM) of the concerned District Industries Centre(DIC). The same has also been notified in the gazette dated 18-09-15.
The persons having Aadhaar numbers, by virtue of having provided the demographic as well as biometric details to the state, once and for all, indeed enjoy a greater ease of registration at the UAM portal.
Within a short span of time, more than 38,000 registrations have taken place on the UAM portal owing to the simplified process of registration of MSME units.
(ii) Udyog Aadhaar Memorandum for States with Less Coverage under Aadhaar.
Some of the States have less than adequate coverage till date as per the UIDAI data. It has been clarified to such States, such as Assam that the option of assisted filing of UAM in offline mode with the GM (DIC) could be resorted to. Aadhaar number is not a mandatory requirement when the States/UTs have offices in the Districts headed by GM (DICs) and whose primary role is to promote and facilitate industries in the District. The UAM can be filled through the concerned GM (DIC). The States/UTs have been asked to sensitize their District Industries Centers for a proactive role in Udyog Aadhaar.
(iii) Single System of Registration for MSMEs- Udyog Aadhaar Memorandum
Prior to 18-09-15, when the Entrepreneurs’ Memorandum-II was filled with the GM (DIC), heterogeneous systems were in vogue. Some States had their own online systems for registering MSMEs, some were using the national portal created by Ministry of MSME and some (around 10 states) were continuing with the manual (paper form) system of filing EM-II.
The new system of Udyog Aadhaar offers convergence of all heterogeneous systems to a single system of registration. The system is capable of delivering assured ease of doing business where the UIDAI has coverage i.e. 92% of the country’s adult population.
The Udyog Aadhaar portal has suitable provisions for sharing State/District specific data of registrations under Udyog Aadhaar with the respective States/ Districts. This initiative of maintaining the data on MSMEs with Ministry of MSME is likely to save cost in the long run since States/UTs would no longer be requiring maintaining the same.
(iv) The Genesis of Udyog Aadhaar
The ministry for micro, small and medium enterprises had last month notified Udyog Aadhaar, taking a cue from the prime minister’s radio show Mann Ki Baat, where he had talked about simplifying procedures to start a business with a single-page registration form.
A large chunk of enterprises in India are simply not registered due to the cumbersome paperwork involved in the process and, therefore, can’t tap the government schemes for them. The KV Kamath panel on financing the MSME sector, that has been the biggest job creator in recent years, had recommended that the registration should be universalized.
The concept of Udyog Aadhaar and ease of registration have thus originated to ensure wider coverage of MSMEs to avail the benefits under various Schemes of Central/ State governments.
9. Frequently Asked Questions and Answers
Q1- Has EM-I/II been replaced by UAM?
Yes. After the notification dated 18-09-2015, filing of EM-I/II by States/UTs should be discouraged and instead all efforts be made to popularize the filing of UAM on the portal created by Ministry of MSME i.e.http://udyogaadhaar.gov.in
Q2- What is the date for adopting the UAM and stopping EM-I andEM-II?
It is clarified that once the UAM has been notified dated 18-09-15, there cannot be a different cut-off date announced for adopting UAM. However, in order to maintain continuity, the cases of EM-I/II filing under process till 18-09-2015 may be accepted.
Q3- Whether the multiple system of registration may exist after introduction of UAM?
All other online/offline systems of registration of MSMEs created and maintained by Central/State/UT Governments should cease to register new MSMEs forthwith. Such online platforms may be allowed to exist for the time being to enable access to useful legacy data for decision making. Henceforth, there should be only one system i.e. UAM for the registration of new MSME units.
Q4- Whether States/UTs have access to reports/ query and such other functions as may be required by GM (DIC)/ Directorate of Industries on the UAM portal?
The Udyog Aadhaar portal has been envisaged to take care of this requirement.
Q5- How to select NIC Code of the Activity performed by the enterprise.
NIC code can be selected once the aadhaar number is validated and major activity (manufacturing or service) is selected. In order to simplify the selection of appropriate NIC code, a three-stage drop-down list is available to the users
Q6- Is there a provision to verify the UAM credentials by the procurement agencies including government departments and PSUs?
NIC has been advised to suitably provide this provision in a way that several e-procurement portals in the country, created by the government or private but being used by the government could benefit from the UAM portal in so far as online verification of a MSME unit is concerned.
Q7- Is there a difference in the information sought under EM-I/II and the new UAM?
In order to promote ease of doing business for MSMEs, it has been decided to seek lesser information than EM-I/II in the UAM.
Q8- How to submit the supporting documents while filing UAM online?
The information sought is on self-certification basis and no supporting documents are required at the time of online filing of UAM.
Q9- What would be the role of “Udyog Bandhu” in the UAM?
The role of facilitating the creation and growth of enterprises in the States/UTs is not proposed to change in any manner whatsoever through UAM. The concept of “Udyog Bandhu” may therefore not be affected by UAM.
Q10- Whether the new system of UAM encapsulates the change in the line of production?
Yes, since the new system constitutes self declaration format, the change in the line of productions accordingly may be incorporated.
Q11- What would happen to those enterprises which do not have Aadhaar Number?
At present Aadhaar Number is mandatory for registration under UAM. However, the GoI will find a way out for covering those cases where
Aadhaar Number is not available.
Q12- EM-I filed by a prospective enterprise entitles it for certain exemptions from paying stamp-duties. How to handle this in UAM?
Legally, the EM-I/II ceases to exist after 18-09-15. States/UTs may encourage providing all benefits/concessions to MSMEs based on
Q13- Is there a provision for editing of information in UAM data of an enterprise by GM (DIC)?
No. However, GM DICs, on the UAM portal, shall be able to enter their remarks on the respective information provided by the entrepreneurs while filing the UAM online
Q14- What is the future of EM Portal created by Miistry of MSME i.e. http://em.msme.gov.in?
New registrations in the EM Portal have been stopped forthwith.
Q15- Who has access to the data from the UAM portal?
The UAM Portal shall have suitable provisions to allow officials of the State Governments including GM DICs to have password protected access to data of their jurisdiction
Q16- Whether the new system of registration provides NIC Code in Hindi and English?
Presently the NIC Codes are only available in English. However, the same may be made available in Hindi in due course.
Q17- What is the monitoring mechanism available to Director (Industries) and GM (DICs) for new registration under UAM?
Since the UAM is being filing on self certification basis and the UAN is generated instantly, there cannot be any monitoring of the registration process. However, the enterprises filing the UAM online are liable to provide documentary proof of information provided in the UAM, wherever necessary, to the Central Government, State Government or such person as may be authorized.
Q18- Some Disclaimer should be added in UAN.
Notification clearly states that the UAM filed is on self declaration basis. Therefore, no separate disclaimer is required.
Q19- Why power load details have not been asked in UAM?
Power load indicates the requirement of energy to the MSME unit. This has no relevance to the activity of the enterprise and the subject matter is dealt by the State/UT Governments.
Q20- Will there be any updating of data by the entrepreneurs on the UAM portal?
The legacy of SSI registration and EM-I/II does not mandate for updation and the same used to be filed as a one-time exercise on the part of MSME units. The same is proposed to continue.
Q21- How the closing of the business unit is recorded the entrepreneur in the UAM?
It may not be made obligatory for the closing unit to inform about it to the State/UT concerned or the UAM portal.
THE GOVERNMENT OF INDIA
Ministry of Micro, Small and Medium Enterprises
New Delhi, the 18th September, 2015
S.O 2576(E). — In exercise of the powers conferred by sub-section (2) of the section 8 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006) and in supersession of the notification number S.O. 1643(E), dated the 29th September, 2006, published in Part II, Section 3, Sub-section (ii) of the Gazette of India, Extraordinary, dated 30th September, 2006, the Central Government, after obtaining the recommendations of the Advisory Committee in this behalf, specifies that every micro, small and medium enterprise shall file Udyog Aadhaar Memorandum in the form appended to this notification as Annexure-1 and follow the following procedure for filing the Udyog Aadhaar Memorandum, namely:-
(1) there shall be no fee for filing the Udyog Aadhaar Memorandum;
(2) Udyog Aadhaar Memorandum shall be filed online at http://udyogaadhaar.gov.in, the Udyog Aadhaar Portal maintained by the Ministry of Micro, Small and Medium Enterprises, by every micro, small and medium enterprise, but in exceptional cases where online filing is not possible for any reasons, a hard copy of the form as in Annexure 1, duly filled in may be submitted to the concerned District Industry Center which shall file the Udyog Aadhaar Memorandum online, on the behalf of such enterprise;
(3) Udyog Aadhaar Acknowledgement as per Annexure 2 appended to this notification, shall be generated and mailed to the email address provided in the Udyog Aadhaar Memorandum which shall contain unique Udyog Aadhaar Number;
(4) existing enterprises, which have filed Entrepreneurship Memorandum-I or Entrepreneurship Memorandum-II or both, or the holders of Small Scale Industry registration, prior to the coming into force of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006) shall not be required to file Udyog Aadhaar Memorandum, but if they so desire, they may also file the Udyog Aadhaar Memorandum;
(5) in the Udyog Aadhaar Memorandum, the Aadhaar Number shall be of the managing partner, in case of proprietary enterprise, of the authorized partner, in case of partnership enterprise, and of the authorized person, in case of other forms of enterprises;
(6) there shall be no restriction on filing more than one Udyog Aadhaar Memorandum using the same Aadhaar Number;
(7) The Udyog Aadhaar Memorandum shall be filed on self-declaration basis, and no supporting document is required to be uploaded or submitted while filing the Udyog Aadhaar Memorandum, but the Central Government or the State Government or such person as may be authorized in this behalf may seek documentary proof of information provided in the Udyog Aadhaar Memorandum, wherever necessary.
F. No. A-54/1/2014-CDN
(Surendra Nath Tripathi)
Additional Secretary to Government of India