This article talks about Classification of enterprises, Computation of investment in plant and machinery or equipment, computation of annual turnover, fresh and existing registration and reclassification in the registration in view of notification dated 26.06.2020 issued by Ministry Of Micro, Small And Medium Enterprises.

Table of Contents:

1. Classification of Micro, Small and Medium Enterprises (MSMEs)

2. Manner of determination of Investment in Plant and Machinery or Equipment

3. Manner of Computation of Annual Turnover

4. Revised MSME Registration procedure

5. Mandatory Fresh registration of existing Enterprises within prescribed time limit

6. Reclassification on upward/downward change

MSME

1. Classification of Micro, Small and Medium Enterprises (MSMEs)

S. No. Nature of Enterprise Investment in Plant & Machinery or Equipment (in INR) Annual Turnover (in INR)
i. Micro Enterprise ≤ 1 crore ≤ 5 crore
ii. Small Enterprise ≤ 10 crore ≤ 50 crore
iii. Medium Enterprise ≤ 50 crore ≤ 250 crore
  • Distinction between manufacturing and service sector has been Now, the same limits apply for both whether it is manufacturing enterprise or service enterprise.
  • Trading enterprises irrespective of its investment and annual turnover are out of the purview of MSME classification.

2. Manner of determination of Investment in Plant and Machinery or Equipment

(1) Investment in plant and machinery or equipment will be determined from previously filed Income Tax Return (ITR) under the Income Tax Act, 1961.

In case of new enterprise where no ITR is available, value of investment shall be taken based on self-declaration basis until the end of the financial year in which ITR is filed. Further, investment shall be excluding Goods and Services Tax (GST).

(2) Value of Plant and machinery or equipment of the enterprise shall be determined as per Income Tax Rules, 1962.

(3) The cost of certain items specified in the Explanation I to sub-section (1) of section 7 of the MSME Development Act, 2006 shall be excluded from the calculation of the amount of investment in plant and machinery.

Explanation I to sub-section (1) of section 7 of the MSME Development Act, 2006

“For the removal of doubts, it is hereby clarified that in 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”.

3. Manner of Computation of Annual Turnover

(1) Exports of goods or services or both, shall be excluded while calculating turnover.

(2) Turnover and exports turnover for an enterprise shall be computed as per Income Tax Act or the Central Goods and Services Act.

4. Revised MSME Registration procedure

(1) Registration shall be done through Udyam Registration portal.

No fee shall be charged for MSME

Aadhaar number of proprietor/ managing partner/ karta/ authorised signatory as the case may be, shall be required for the Registration.

(2) 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.

(3) There is no requirement to upload any documents.

(4) On registration an e-certificate i.e Udyam Registration Certificate shall be granted with permanent identity number to be known as Udyam Registration Number.

(5) One enterprise one registration only unless all the activities can’t be mentioned in one registration.

(6) Any omission or misrepresentation shall be liable to penalty under section 27 of MSME Development Act, 2006.

5. Mandatory Fresh registration of existing Enterprises within prescribed time limit

The existing enterprises registered prior to 30th June, 2020, their registration shall be valid only up to the 31st day of March, 2021.

All enterprises registered till 30th June, 2020, shall be re-classified in accordance with this notification.

All existing enterprises registered under EM–Part-II or UAM shall be required to reregister on the Udyam Registration portal on or after the 1st day of July, 2020 but on or before 31st March, 2020 as per new provisions else they will cease to exist as MSME.

6. Reclassification on upward/downward change

An enterprise having Udyam Registration Number shall update its information as may be required, on self-declaration basis. Classification of the enterprise may change accordingly.

In case of failure to update the relevant information within the period specified, enterprise shall be liable to lose its status.

In case of an upward change in terms of classification, an enterprise will maintain its present status till expiry of one year from the close of the year of registration.

In case of downward change 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.

Disclaimer- This article is for informational purposes only and is intended, but not promised or guaranteed, to be correct, complete, and up-to-date. Author hereby disclaims any and all liability to any person for any loss or damage caused by errors or omissions, whether such errors or omissions result from negligence, accident or any other cause.

Please feel free to contact the author in case you require any further information/ clarification on the above article at Email: casatishprasadsingh@gmail.com.

Disclaimer: The contents of this article are for information purposes only and does not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

Author Bio

Qualification: CA in Practice
Company: N/A
Location: EAST DELHI, New Delhi, IN
Member Since: 03 Apr 2020 | Total Posts: 5
CA Satish Singh is a practicing Chartered Accountant. Besides, He also holds membership of ICSI. A B.com(H) graduate from Motilal Nehru College, Delhi University. He did his articleship training from M/S. Mohinder Puri & Co., Chartered Accountants a renowned Chartered Accountancy Firm. His Post View Full Profile

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10 Comments

  1. JUGGI LAL GUPTA says:

    As per clarification, entity registered till 30-06-2020 is valid up to 31-03-2021. Kindly tell me then what is the meaning of turnover limit up to 31-03-2021 ?. If any entity registered before 30-06-2020 but his turnover crossed the limit then what is the status of that entity. In such case turnover will be criteria or existing certificate will be taken in to account irrespective of turnover or investment

    1. CA Satish Singh says:

      Thanks for Asking.

      Your existing MSME registration is valid till 31.03.2021 even if you do not register yourself under Udyam registration.

      Further, status of MSME does not change immediately in case of upward or downward shift.
      The changed status is valid atleast till the close of the year in which change took place.

  2. Neha Priya says:

    What is the meaning of “close of year of registration”? Does this mean that in case of upward change the enterprise shall maintain status till 31st March, 2021?

    1. CA SATISH SINGH says:

      Dear Neha,
      Apology for delayed reply. 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. It need not be till 31.03.2021.

  3. Deeksha says:

    Sir wanted to check if the written down value of investments/ assets is to be taken or the original cost of the assets for the purpose of calculation of investments.

      1. CA SATISH SINGH says:

        For the removal of your doubd kindly refer office memorandum dated 06.08.2020. Extract of the same is reproduced below:

        It is clarified that online Form for Udyam Registration captures depreciated cost as on
        31 st March each year of the relevant previous year. Therefore, the value of Plant arid
        Machinery or Equipments for all purposes of the Notification No. S.O. 2119(E) dated
        26.6.2020 and for all the enterprises shall mean the Written Down Value (WDV) as at the
        end of the Financial Year as defined in the Income Tax Act and not the cost of acquisition or
        original price, which was applicable in the context of the earlier classification criteria.

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