Paragraph 5 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Paragraph 5 of S.O. 2119(E) says how turnover is treated when an enterprise is classified. Exports of goods or services or both are left out. Turnover information is linked to the Income Tax Act or the CGST Act and the GSTN. An enterprise without a PAN could use self-declaration only up to 31 March 2021, after which PAN and GSTIN became mandatory.
5(1): exports of goods or services or both are excluded from turnover, for micro, small and medium enterprises alike. 5(2): turnover and export turnover information is linked to the Income Tax Act or the CGST Act and the GSTN. 5(3): turnover of an enterprise without PAN was taken on self-declaration up to 31 March 2021, and after that PAN and GSTIN are mandatory.
The three sub-paragraphs at a glance
| Sub-para | Rule | Key words |
|---|---|---|
| 5(1) | Exports excluded | "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" |
| 5(2) | Source of information | "linked to the Income Tax Act or the Central Goods and Services Act (CGST Act) and the GSTN" |
| 5(3) | Enterprises without PAN | Self-declaration up to 31 March 2021; afterwards "PAN and GSTIN shall be mandatory" |
Paragraph 5(1): exports are excluded
The text says exports "of goods or services or both" are excluded "while calculating the turnover of any enterprise whether micro, small or medium, for the purposes of classification". Four points follow.
- Both goods and services. The exclusion is not limited to goods.
- All three categories. It applies to micro, small and medium alike.
- Only for classification. The words "for the purposes of classification" limit the exclusion to working out the category. The paragraph does not say how turnover is treated for any other purpose, such as tax.
- No definition of export. The paragraph does not define what counts as an export. Take the meaning from the law that governs the transaction and do not assume more than the text says.
Because the turnover ceiling in paragraph 1 (Rs 10 crore, Rs 100 crore and Rs 500 crore after S.O. 1364(E)) is tested against turnover after this exclusion, an enterprise with large exports may have a much smaller classification turnover than its books show. If you need help applying this to your figures, see our Udyam registration service. The investment test still applies; see paragraph 4.
Paragraph 5(2): linked to tax records
"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 GSTN."
Two things stand out. The paragraph names both turnover and export turnover, so the exclusion in 5(1) is worked out from linked records and not only from what the enterprise declares. Also, the paragraph uses "or": income-tax records or GST records. It does not say which prevails if they differ, and it does not describe how the link operates on the portal. This article does not guess. Paragraph 8(3) says classification is updated based on information "furnished or gathered from Government's sources including ITR or GST return"; see our post on paragraph 8(1) to (3).
Paragraph 5(3): enterprises without a PAN
"The turnover related figures of such enterprise which do not have PAN will be considered on self-declaration basis for a period up to 31st March, 2021 and thereafter, PAN and GSTIN shall be mandatory."
| Period | Position under 5(3) |
|---|---|
| Up to 31 March 2021 | Turnover figures of an enterprise without PAN considered on self-declaration |
| After 31 March 2021 | PAN and GSTIN "shall be mandatory" |
As on 30 September 2026 the transition date has long passed, so the practical rule is that PAN and GSTIN are needed. The text says "PAN and GSTIN"; it does not say what applies to an enterprise that has a PAN but no GST registration, and this article does not decide that. Paragraph 6(6) deals with one related case: an enterprise duly registered as an Udyam with PAN may fill any deficiency of information for earlier years, when it did not have PAN, on self-declaration; see paragraph 6 for the registration rules.
How turnover fits in
Turnover is half of the composite test in paragraph 3, and all units under one PAN are aggregated. The paragraph 3(3) aggregation and the paragraph 5(1) export exclusion work together: combine the units under the PAN, then leave out exports.
What paragraph 5 does not say
- It does not define turnover beyond excluding exports.
- It does not say which period's turnover is used; it speaks of the information linked to the tax records.
- It does not say what happens if the income-tax and GST figures differ.
- It does not say what to do for an enterprise with PAN but no GSTIN after 31 March 2021.
Practical examples
Example 1: an exporter. An enterprise shows total sales of Rs 14 crore, of which Rs 6 crore is exports of goods. Under 5(1) the exports are excluded, so the turnover used for classification is Rs 8 crore. Investment still needs to be tested separately.
Example 2: service exports. A software services firm has Rs 9 crore from clients abroad and Rs 2 crore from domestic clients. Paragraph 5(1) excludes exports of services too.
Example 3: a firm with no PAN in 2020. A small enterprise had no PAN in 2020. Up to 31 March 2021 its turnover figures could be considered on self-declaration under 5(3); after that date PAN and GSTIN are required.
Need help with turnover and Udyam?
Turnover for Udyam is not simply the top line in your books. Our Udyam registration team can help you work out the figure paragraph 5 asks for and match it with your tax records.
Key takeaways
- Exports of goods or services or both are excluded from turnover for classification (para 5(1)).
- Turnover and export turnover information is linked to income-tax or CGST and GSTN records (para 5(2)).
- Self-declaration for an enterprise without PAN ran only up to 31 March 2021; afterwards PAN and GSTIN are mandatory (para 5(3)).
- The current turnover ceilings come from S.O. 1364(E), effective 1 April 2025.
Read next
- Paragraph 4 of the Udyam Notification (S.O. 2119(E)): Calculation of investment in plant and machinery
- Paragraph 6 of the Udyam Notification (S.O. 2119(E)): Registration process, fee and Aadhaar
- MSME Investment and Turnover Calculation Criteria Notified
- MSME Classification Under S.O. 1364(E) and Udyam Registration
Disclaimer: Based on the Micro, Small and Medium Enterprises Development Act, 2006 (official text, not amended by the Jan Vishwas Acts of 2023 or 2026) and the Udyam notifications S.O. 2119(E) of 26 June 2020 and S.O. 1364(E) of 21 March 2025, read with later developments noted in the article, as on 30 September 2026. Notifications, rules and the Udyam portal change; verify the current position before acting.