NEW CLASSIFICATION AND REGISTRATION PROCESS FOR MSME NOTIFIED

The Union Ministry of Micro, Small and Medium Enterprises (‘MSME’), vide Notification No. S.O. 2119(E) dated 26.06.2020, declared the new process of classification and registration of enterprises as #MSME. This Notification comes into effect from 01.07.2020. The Notification deals with the manner of calculation of investment in plant and machinery. It deals with turnover classification for MSME and updation of information and transition period for the classification.

It also emphasizes registration of all existing and new MSME in the Udayam registration portal. For this purpose an enterprise will be known as Udyam and its registration process will be known as ‘Udyam Registration’.

The Government has already issued a Notification number S.O.1702 (E), dated 01.06.2020,  to make the change in the MSME definition in accordance with #Aatmanirbhar Bharat Package on 13.05.2020.This was also made effective from 01.07.2020.

The Notification dated 26.06.2020 states that Udyam Registration can be filed online based on self-declaration with no requirement to upload documents, papers, certificates or proof. It also clarified that this is possible because the Udyam Registration process has been fully integrated with the Systems of Income Tax and Goods and Services Tax and the details filled can be verified on the basis of Permanent Account Number (PAN) or Goods and Services Tax Identification Number (GSTIN) details.

As per the revised definition, vide Notification dated 01.06.2020, an enterprise shall be classified as a MSME on the basis of the following criteria, namely:–

EnterprisesInvestment and TurnoverLimit
MICROInvestment in plant and machinery or equipments;  Does not exceed Rupees 1 Crores    
Turnover  Does not exceed Rupees 5 Crores
SMALLInvestment in plant and machinery or equipments;  Does not exceed Rupees 10 Crores  
Turnover  Does not exceed Rupees 50 Crores  
MEDIUMInvestment in plant and machinery or equipments;  Does not exceed Rupees 50 Crores
TurnoverDoes not exceed Rupees 250 Crores

Earlier, MSMEs were classified in two categories, such as manufacturing and service enterprises. Now this has been removed and both will be the same. Moreover, if any enterprise crosses the ceiling limits specified for its present category in either of the two criteria of investment or turnover, then it will cease to exist in its current category. And it will be placed in the next higher category. However no enterprise shall be placed in the lower category unless it goes below the ceiling limits specified for its present category in both the criteria of investment as well as turnover.  

All units shall be collectively treated as one enterprise if they are listed with the same Goods and Services Tax Identification Number (GSTIN) and Permanent Account Number (PAN). Further, for all of such entities, the turnover and investment figures shall be seen together and only the aggregate values will be considered for deciding the category as micro, small or medium enterprises.

Other Highlights of Notification dated 26.07.2020

  1. An enterprise can be registered just on the basis of Aadhaar number.
  2. Investment in ‘Plant and Machinery or Equipment’ and ‘Turnover’ are the basic criteria for classification of MSMEs now;
  3. Exports of goods or services or both shall be excluded while calculating the turnover of any enterprise whether Micro, Small or Medium;
  4. The Ministry of MSME has established a strong facilitation mechanism for the MSMEs. This process is in the form of ‘Single Window Systems’ at the district level and regional level. This will be helpful for those entrepreneurs who are unable to file the Udyam Registration.

Now, the Facilitation of MSMEs will be a simple and yet fast-track. It is a revolutionary step towards Ease of Doing Business.

Lakshmi Vishwakarma

Associate

The Indian Lawyer

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