Introduction – Udyam Registration
The Government of India (“GOI”) has recently announced many relief packages for Micro, Small or Medium Enterprise (“MSME”) sector to boost the industry as well as the Indian economy. These initiatives include ease of doing business, Digital India, start-ups, easy loans, Make in India, subsidies, moratorium for loans, reduced rate of interest, simple tax compliances, the extension of due dates for filing returns and transparency in working to make ‘Aatam Nirbhar Bharat’. Government is also working on several initiatives, such as preparation of huge land pools, to attract potential investors to India amid the corona virus-triggered turbulence. Govt has re-defined MSME law (introduced Udyam Registration) aand relaxed many provisions so that enterprises can avail benefits available, including those businesses which were earlier unable to enjoy the benefits.
Govt has introduced a concept of ‘Udyam Registration’ w.e.f. 1st July, 2020 for existing registered under ‘EM-II’ & ‘Udyog Aadhar Memorandum- UAM’ as well as new MSME enterprises. We shall discuss about Udyam Registration Number in detail in this article and the recent notification No. S.O. 2119(E) dated 26th June, 2020 issued by MINISTRY OF MICRO, SMALL AND MEDIUM ENTERPRISES.
- Any person who intends to establish a Micro, Small or Medium Enterprise (MSME) may file UDYAM registration Online in the Udyam Registration Portal based on Self Declaration. Click here to visit the Udyam Registration Portal.
- On Registration, an enterprise will be assigned a Permanent Identity Number to be known as Udyam Registration Number.
- An electronic certificate, namely, “Udyam Registration Certificate” shall be issued on completion of the registration process.
Classification of Enterprises
|Type||Investment (Min)||Investment (Min)||Turnover (Min)|
|Micro||N.A.||1 Crore Rupees||Does not Exceed 5 Crore Rupees|
|Small||More than 1 Crore Rupees||10 Crore Rupees||Does not Exceed 50 Crore Rupees|
|Medium||More than 10 Crore Rupees||50 Crore Rupees||Does not Exceed 250 Crore Rupees|
A composite Criterion of investment and turnover shall apply for Classification of an enterprise as micro, small or medium (“MSME”)
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 turnover and investment figures for all such entities shall be seen together and only the aggregate values will be considered for deciding the category as an MSME.
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.
Example of Composite Criteria
|Turnover (Rs.)||Investment (Rs.)||Category|
|5 Crore||1 Crore||Micro|
|50 Crore||10 Crore||Small|
|250 Crore||50 Crore||Medium|
|5 Crore||10 Crore||Small|
|50 Crore||50 Crore||Medium|
- Calculation of Investment in Plant & 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 years filed under the Income Tax Act, 1961.
- In case of a 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 31st March of the financial year in which it files its first 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).
- The purchase (invoice) value of a plant and machinery or equipment, whether purchased first hand or second hand, shall be taken into account excluding Goods and Services Tax (GST), on self-disclosure basis. If the enterprise is a new one without any ITR. The cost of certain items specified in the Explanation I to sub-section (1) of section 7 of the Act shall be excluded from the calculation of the amount of investment in plant and machinery.
- Further, through a notification dated 5th October, 2006, the following items shall be excluded while calculating the investment in plant and machinery;
- equipment such as tools, jigs, dyes, moulds and spare parts for maintenance and the cost of consumables stores;
- installation of plant and machinery;
- research and development equipment and pollution controlled equipment;
- power generation set and extra transformer installed by the enterprise as per regulations of the State Electricity Board;
- bank charges and service charges paid to the National Small Industries Corporation or the State Small Industries Corporation;
- procurement or installation of cables, wiring, bus bars, electrical control panels (not mounded on individual machines), oil circuit breakers or miniature circuit breakers which are necessary to be used for providing electrical power to the plant and machinery or for safety measures;
- gas producers plants;
- transportation charges ( excluding sales-tax or value-added tax and excise duty) for indigenous machinery from the place of the manufacture to the site of the enterprise;
- charges paid for technical know-how for the erection of plant and machinery;
- such storage tanks which store raw material and finished product and are not linked with the manufacturing process; and
- fire-fighting equipment.
- While calculating the investment in plant and machinery referred above, the original price thereof, irrespective of whether the plant and machinery are new or second-handed, shall be taken into account provided that in the case of imported machinery, the following shall be included in calculating the value, namely;
- Import duty (excluding miscellaneous expenses such as transportation from the port to the site of the factory, demurrage paid at the port);
- Shipping charges;
- Customs clearance charges; a
- Sales tax or value-added tax.
The new notification dated 26th June, 2020 has been issued in the supersession of the notification issued on 5th October, 2006 and since this notification provides that:- The cost of certain items specified in the Explanation I to sub-section (1) of section 7 of the Act shall be excluded from the calculation of the amount of investment in plant and machinery.”
And explanation itself provides that all those prescribed in the notification issued in this regard will also be exempted, hence, all the above investment in plant and machinery will not be considered while calculating the investment.
Calculation of Turnover
- Export of Goods/Services will be excluded for the purpose of calculation of turnover of an enterprise.
- Information as regards turnover and exports turnover for an enterprise will be Linked to Income Tax Act or CGST Act and the GSTIN.
- The turnover of Such enterprise which doesn’t have PAN will be considered on Self-declaration basis up to 31st March 2021, thereafter, PAN and GSTIN are Compulsory.
Registration Process & points to remember
a) Visit Udyam Registration Portal
b) There will be no fee for filing Udyam Registration
c) 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 the 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.
|Status of Firm||Document||Of Whom|
|Partnership||Aadhaar Card||Managing Partner|
|Company/LLP/Co- Operative Society/Society/Trust||PAN & GSTIN||Aadhaar Card of its Authorised Signatory|
d) 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
e) Whoever intentionally misrepresents or attempts to suppress the self-declared facts and figures appearing in the Udyam Registration or updating process shall be liable to such penalty as specified under section 27 of the Act.
Registration of Existing MSME
- All existing MSME Shall Register Again on the Udyam Registration Portal on or after the 1st day of July 2020
- All MSME shall be reclassified as per New Notification
- Existing Enterprises registered before 30th June 2020 shall continue to be valid for a period up to 31st March 2021.
- Any Enterprise which is registered with any other Organisation under MSME shall register itself under Udyam Registration.
- There shall be no fee for Registration
Updation of Registration and Transition Period in Classification
- An enterprise having Udyam Registration shall update its information online in the Udyam Registration portal including the details of GST and ITR for the previous financial year and such other additional information on self- declaration basis.
- Failure on Updating info will lead to suspension of its Status
- Based on Information gathered from Government sources like IT Department and GST department, the classification of enterprise will be updated.
- Any graduation (from lower to higher), Reverse Graduation (Higher to Lower) of enterprise, a communication will be sent to the enterprise about the change of status.
- If any upward change in terms of investment/ Turnover or both, and consequent reclassification an enterprise will maintain its prevailing status till the expiry of one year from the close of the year of registration.
- In case of reverse graduation of an enterprise (Higher to Lower), the enterprise will continue in its present category till the closure of the financial year and it will be given the benefit to the changed status only with effect from 1st April of the financial year following the year in which such change took place.
Facilities and grievance redressal of enterprise
- The Champions Control Rooms functioning in MSMEs including the Development institute shall act as Single Window Systems for the facilitation of registration Process and further assistance to MSMEs.
- District industries centres will act as Single Window Facilitation systems in their respective districts.
- Any person unable to file the Udyam Registration for any reason including lack of Aadhaar Number may approach anyone of the Single Window Systems for Udyam registration purposes with his Aadhaar enrolment identity slip or copy of Aadhaar enrolment request or bank photo passbook or voter identity card or passport or driving licence.
- In case of any discrepancy or complaint, the General Manager of the District Industries Centre of the concerned District shall undertake an inquiry for verification of the details of Udyam Registration submitted by the enterprise and thereafter, forward the matter with necessary remarks to the Director or Commissioner or Industry Secretary concerned of the State Government who after issuing a notice to the enterprise and after allowing presenting its case and based on the findings, may amend the details or recommend to the Ministry of Micro, Small or Medium Enterprises, Government of India, for cancellation of the Udyam Registration Certificate.
The Government has substantially increased the threshold limit and streamlined the process for taking registration. Eligible enterprises shall consider getting itself registration under the relevant category for obtaining various benefit including, but not limited to, a quick realisation of sale consideration. It is the fact that Industries and their auditors take MSME outstanding very seriously and make all endeavours to clear their dues within time.
The article is written only for the purpose of providing information and knowledge related to Fast Track Merger. This article is based on the provisions in force as on date and our interpretation of the law. Kindly check the relevant laws and provisions before relying on this article. For more information, feel free to contact us.