Previously known MSME registered entities are now known and registered as UDYAM, i.e.; Micro, Small and Medium Enterprises. MSME stands for Micro, Small and Medium enterprises, categorized based on the annual revenue in business. These entities possess a UDYAM registration certificate, registered with MSME Department of the Central Government under MSME Development Act, 2006. The Act was enacted for the promotion and growth of the businesses operating at small or medium scale.
Where all major activities were eligible for registration under MSME earlier, trading and other few activities are now specifically excluded from eligibility. Although the registration is voluntary, businesses prefer to obtain MSME registration online due to numerous benefits declared by the government.
Vide notification dated 26th June 2020, the Ministry of Micro, Small and Medium Enterprises notifies revised criteria for classifying the enterprises as Micro, Small and Medium Enterprises (i.e., MSME) and lays down the form and procedure for ‘Udyam Registration’. The present article briefly analysis the said notification.
The basis for classification of an enterprise as a micro, small and medium enterprise is-
|Classification||Investment in plant and machinery or equipment||Turnover|
|Micro enterprise||Not more than INR 1 Crore||Not more than INR 5 Crore|
|Small enterprise||Not more than INR 10 Crore||Not more than INR 50 Crore|
|Medium enterprise||Not more than INR 50 Crore||Not more than INR 250 Crore|
Following points are to be taken care of while calculating the investment in plant and machinery or equipment and turnover for the purpose of classification-
- The investment in plant and machinery or equipment shall be considered as per the Income Tax Return of the previous year.
- In the case where there is no prior income tax return, the investment in plant and machinery or equipment shall be based on self-declaration of the promoter of the enterprise. Here, the invoice value of the plant and machinery or equipment excluding Goods and Service Tax is to be self-declared.
- While calculating turnover for the purpose of classification, export turnover of goods or services or both shall be excluded.
- Turnover as per Income Tax Act or the Central Goods and Service Tax Act shall be considered.
Udyam registration of new enterprise
In order to register under Udyam Registration Portal, the new enterprise is required to follow the below steps-
- The new enterprise willing to establish as an MSME needs to apply for online Udyam Registration in Udyam Registration Portal.
- The application is based on self-declaration, and there is no further requirement to upload any documents, certificates, papers, or proofs.
- On successful submission of application, the enterprise will be assigned ‘Udyam Registration Number’ (i.e., permanent identity number).
- On completion of the registration process, the enterprise shall be issued a ‘Udyam Registration Certificate’.
- Other points to be kept in mind-
- Udyam registration is free of cost.
- Aadhaar number is mandatory for obtaining udyam registration. Following aadhaar number is required based on the type of firm-
|Type of firm||The person whose Aadhaar number is required|
|Partnership firm||Managing partner|
|Hindu Undivided Family||Karta|
|Company or a Co-operative Society or a Trust or a Limited Liability Partnership||Authorized signatory|
Importantly, an enterprise can file only one Udyam registration. Additionally, a multiple number of activities of the enterprise i.e., manufacturing, services or both can be added in one Udyam registration.
Udyam registration for existing enterprise
The existing enterprises registered either under EM-Part – II or UAM or registered with any other organization under the Ministry of Micro, Small and Medium Enterprises are required to register again on the Udyam Registration Portal. Such enterprises are required to apply and obtain Udyam Registration on or after 1st July 2020.
The enterprises registered prior to 30th June 2020 should note the following points-
- Such enterprises shall be re-classified based on the revised criteria notified under notification dated 26th June 2020; and
- Such enterprises registered prior to 30th June 2020 shall be valid only till 31st March 2021.
Updation of information in Udyam registration
The enterprise already having the Udyam registration number needs to update its information online on the Udyam Registration Portal. In case of failure, the enterprise would be liable for suspension of its status.
The classification of the enterprise shall be updated based on the information collected from the income tax return or the goods and service tax return. The updation, if any, and its consequence are explained hereunder-
|Type of updation||Consequence of updation|
|Upward graduation||The enterprise will continue to maintain its prevailing status till the expiry of one year from the close of the year of the registration.|
|Downward graduation||The enterprise will continue its prevailing status till the close of the financial year. The benefit of the changed status will be available from subsequent financial year.|