Who Can Register under MSME:Eligibility and Online Procedure

Overview

Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly growing and dynamic sector of the Indian economy over the last decade. India has more than 6 crore units falling under MSME categories which contribute approximately 29% to the country’s GDP.

These enterprises not only play a crucial role in providing large employment opportunities at comparatively lower capital cost than large industries but also help in industrialisation of rural and backward areas, thereby, reducing regional imbalances, and assuring more equitable distribution of national income and wealth.

MSMEs are complementary to large industries as ancillary units and this sector contributes enormously to the socio-economic development of the country.

Recommended: How to register for GST online step by step

Definition of MSME

Previous MSME Classification

Criteria : Investment in Plant & Machinery or Equipment

ClassificationMicroSmallMedium
Manufacturing
Enterprise
Investment < Rs. 25 lakhsInvestment < Rs. 5 Cr.Investment < Rs. 10 Cr.
Service EnterpriseInvestment < Rs. 10 lakhsInvestment < Rs. 2 CrInvestment < Rs. 5 Cr.

Revised MSME Classification (Updated up to 28-06-2020)

Composite Criteria : Investment and Annual Turnover

ClassificationMicroSmallMedium
Manufacturing &
Services
Investment < Rs. 1 Cr. And
Turnover < Rs. 5 Cr
Investment < Rs. 10 Cr. And Turnover < Rs. 50 Cr.Investment < Rs. 50 Cr. And Turnover < Rs. 250 Cr

Note:Now there will be no “Udyog Aadhaar Registration”. The same will be replaced by “Udyam Registration” w.e.f. 1st July 2020.

Method of Calculation of Value of Investment in Plant and Machinery or Equipment

ParticularsPrevious Manner of CalculationNew Manner of Calculation
Related
Notification
S.O. 1722(E) dated October 5, 2006S.O. 2119(E) dated June 26, 2020
Meaning of
Plant and
Machinery or
Equipment
No such clear meaning provided
earlier
The meaning as assigned to the plant and machinery in the Income Tax Rules, 1962 and shall include all tangible assets (other than land and building,
furniture and fittings).
(This has expanded the scope of items which can be included in Plant and Machinery. As per Income Tax Rules, vehicle, computer and its peripherals,
books etc. are considered as P &M)
Value to be
taken from
For the Value, following documents could be relied upon:
(1) A copy of the invoice of the purchase of plant and machinery; or
(2) Gross block for Investment in plant and machinery as shown in the audited accounts; or
(3) A certificate issued by a Chartered Accountant
regarding purchase price of plant and machinery.
(As per RBI Notification RBI/2017-18/21 – FIDD.MSME & NFS.
BC.No.10/06.02.31/2017-18)
In case of Existing Enterprises-
The value will be taken from Income Tax
Return (ITR) of the previous years filed under the Income Tax Act, 1961.
In case of New Enterprises (where no prior ITR is available)-
The value will be based on self-declaration* of the promoter of the enterprise (such relaxation shall end after the 31st March of the financial year in which it files its first ITR)
*The purchase (invoice) value of the plant and machinery, whether purchased first hand or second hand, shall be taken into account excluding Goods and Services Tax (GST) for self- declaration by the
promoter. i.e. the GST part will not be considered while calculating the value of Plant and machinery.
Exclusions
from the Value
The cost of items specified in Explanation I to Section 7(1) shall be excluded.
(The list of such items is provided by S.O. 1722(E) dt. October 5, 2006)
The cost of items* specified in Explanation I to Section 7(1) shall be excluded.
*Items provided under the Explanation-Pollution Control,Research and Development,
Industrial Safety Devices & such other items as may be specified.
(Note: The old notification S.O. 1722(E) issued under this explanation is superseded by the new MSME notification.)
Basis of criteria
of Enterprises
One Udyog Aadhaar Registration was available to one PAN.1)All units with GSTIN listed against the same PAN shall be collectively treated as one enterprise and
2)the turnover and investment figures for all of such entities shall be seen together and only the aggregate values will be considered for deciding the category as micro, small or medium enterprise.

How to calculate Turnover of the Enterprise

The value of turnover is to be calculated as follows:

ParticularsIn case of Existing EnterprisesIn case of New Enterprises
Value of Turnover
to be taken from
ITR and GST
Returns
Self-declaration Basis (for a period upto 31st March,2021 and thereafter PAN and GSTIN shall be mandatory.)
Exclusions from
the turnover
Export of Goods or
services or both
Export of Goods or services or both

Validity of Enterprises (Udyog Aadhaar) Registered till 30th June 2020

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ParticularsValidity
All existing Enterprises registered
prior to 30th June 2020
31st March 2021

Note:All existing enterprises registered under EM Part-II or UAM shall register again on the Udyam Registration portal on or after the 1st day of July, 2020 which will be reclassified according to this notification.

Also Read: How to file GSTR 9C online step by step guide

MSME Registration Documents

Nature of ConcernDocument Required
a proprietorship firmAadhaar Number of Proprietor
a partnership firmAadhaar Number of Managing
Partner
a Hindu Undivided Family (HUF)Aadhaar Number of Karta
a Company or a Limited Liability Partnership or a Cooperative Society or a Society or a TrustGSTIN and PAN along with Aadhaar number of the Concern
itself

MSME Online Registration Process

  1. The form for registration shall be as provided on the Udyam Registration portal.
  2. There will be no fee for filing Udyam Registration.
  3. Aadhaar number shall be required for Udyam Registration.
  4. In case, an enterprise is duly registered as an Udyam with PAN, any deficiency of information for previous years when it did not have PAN shall be filled up on self-declaration basis.
  5. 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.

Also Read:What is capital gain?How it is calculated?

Updation of information on Portal and Reclassification of Category

  • An enterprise having Udyam Registration Number shall update its information online in the Udyam Registration portal, including the details of the ITR and the GST Return for the previous financial year and such other additional information as may be required, on self declaration basis.
  • Failure to update the relevant information within the period specified in the online Udyam Registration portal will render the enterprise liable for suspension of its status.
  • Based on the information furnished or gathered from Government’s sources including ITR or GST return, the classification of the enterprise will be updated.
  • In case of graduation (from a lower to a higher category) or reverse graduation (sliding down to lower category) of an enterprise, a communication will be sent to the enterprise about the change in the status.

Validity of Old Category and Applicability of Reclassified Category

ParticularsDetailsValidity of Old
Category
New Category to be
effective
Graduation (Upward
Classification)
(Eg. Small to Medium)
Due to change in terms of
investment in plant and
machinery or equipment
or turnover or both
(Turnover is exceeding
Rs. 50 crore)
Till expiry of one year
from the end of the year
of registration
(31st December 2021)
From the subsequent Year
after the expiry of one year
from the close of the year of
registration
(1st January 2022)
Reverse Graduation
(Downward
Classification)
(Eg. Small to Micro)
Due to change in terms of
investment in plant and
machinery or equipment
or turnover or both
(Investment in Plant and
Machinery is less than Rs.1 Cr. and Turnover is less than Rs.5 Cr.)
Closure of the Financial
Year in which change
took place
(31st March 2021)
From 1st April of the financial
year following the year in
which such change took place
(1st April 2021)

Frequently Asked Questions(FAQ’s)

1.Applicability of New Udyam Registration?

On or after 01.07.2020.

2.Validity of Udyog Aadhar?

Till 31.03.2021.

3.How the value of Plant & Machinery will be taken – Cost or WDV?

WDV.

4.What are the Exclusions from Plant & Machinery?

As per Section 7(1) of MSMED Act,following will be excluded:
1.Pollution control,
2.Research and development and
3.Industrial safety devices
4.As specified by notification

5.What are the Inclusions in Plant & Machinery?

As per the latest notification of MSME,for the purpose of meaning of P&M, the Income Tax Rules, 1962 has to be referred.

6.How value of Plant & Machinery will be linked with IT?

It will be done through feeding of data on portal for getting new Udyam Registration.

7.How Turnover will be calculated?

Turnover (from GST returns) of all GSTIN linked with one PAN has to be aggregated and also it will be linked with turnover as per ITR.

8.Is Trader eligible being MSME?

Trading activity is neither a manufacturing activity nor a service activity hence cannot be registered as MSME.

9.How much is the Penalty of contravention of MSMED Act?

Minimum Rs. 10,000/-.

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