MSME Classifications and Registration Requirements w.e.f. 01.07.2020

Hemant Kumar Gupta | Last updated: 09 January 2021

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Quick Summary

As of 1st July 2020, the Ministry of Micro, Small and Medium Enterprises introduced new criteria for classifying businesses and updated registration procedures. These changes define Micro, Small, and Medium enterprises based on investment in plant and machinery, and annual turnover, considering all units under the same PAN collectively. New enterprises require an Aadhaar number for registration on the Udyam portal, while existing registered businesses must re-register under the new guidelines before March 31st, 2021.

Ministry of Micro, Small and Medium Enterprises have come out with notification no. [F. No. 21(5)/2019-P&G/Policy (Pt-IV)] dated 26th June 2020, wherein following new criteria of classification of enterprises and new registration procedures under MSMED Act,2006:-

Classification

Micro Enterprises

Investment in Plant & Machinery or Equipment - Not more than 1 Crore
Turnover- Not more than 5 Crores

Small Enterprises

Investment in Plant & Machinery or Equipment- Not more than 10 Crores
Turnover- Not more than 50 Crores

Medium Enterprises

Investment in Plant & Machinery or Equipment- Not more than 50 Crores
Turnover- Not more than 250 Crores

Criteria of investment and turnover for classification

Investment and Turnover criteria shall be considered together for classification.
All units with GSTIN under same PAN shall be considered collectively i.e. Investment and turnover of all the units shall be considered collectively
For calculation of Investment in Plant & Machinery: -
1. Investment declared in previous year Income Tax Return shall be considered.
2. If there is no previous year Income Tax Return, self-declaration shall be filed by promoter.
3. Value in Purchase invoice excluding GST shall be considered, where there is no Income Tax Return.
4. Plant & Machinery or Equipment shall be all tangible asset except Land & Building and Furniture & Fittings.
5. Definition of Plant & Machinery or Equipment shall be considered as written in Income Tax Act,1961
For calculation of Turnover: -
1. Export turnover shall be excluded.
2. Value of turnover and export shall be linked with Income Tax and GST
3. For Enterprises not having PAN turnover shall be considered on self-declaration basis upto 31.03.2021. After that obtaining of PAN shall be mandatory for enterprises

Registration for New Enterprises

Aadhaar Number shall be required for registration at Udyam Registration portal.
Criteria of usage of Aadhar number shall be :

Constitution	Whose Aadhaar shall be required
Proprietorship	Aadhaar Number of proprietor
Partnership	Aadhaar Number of managing partner
HUF	Aadhaar Number of Karta
Company, LLP, Cooperative Society, Society or Trust	GSTIN & PAN of Organisation and Aadhaar of authorised signatory

Registration for Existing Enterprises

All enterprises registered under EM–Part-II or UAM (i.e. existing Udyog Aadhaar) shall register again on Udyam Registration portal.
Enterprises shall be reclassified as per new criteria.
Existing registration shall be valid upto 31st March, 2021.

Post- Registration procedures

Udyam Registration Number (URN) shall be allotted to the enterprises.
After URN is allotted enterprises shall update the details of ITR and GST return relating to previous year, on Udyam Registration portal.
If details are not updated in prescribed time, status of MSME may be suspended.
After the details are update by enterprise, status of enterprise shall get updated on portal.
If there is any change in status, as applied, communication shall be sent to enterprise.
If status is shifted upward, enterprise shall continue its existing status till one year from end of year of registration.
If status is shifted downward, enterprise shall continue its status till the end of financial year. And benefits of new status shall be applicable from 01st April of new year.

Disclaimer: The entire above stated article is squarely based on our opinion, derived from the interpretation of the respective notification. The observations are personal view and authors do not take responsibility of the same and this cannot be quoted before any authority. Users shall also refer to gazette notification before arriving to any decision.

FAQ :

Micro enterprises have investment up to ₹1 Crore and turnover up to ₹5 Crores. Small enterprises have investment up to ₹10 Crores and turnover up to ₹50 Crores. Medium enterprises have investment up to ₹50 Crores and turnover up to ₹250 Crores.

Investment is calculated based on the Income Tax Return of the previous year. If no return exists, a self-declaration is required. For units without an Income Tax Return, the value from purchase invoices (excluding GST) is used. Land, buildings, furniture, and fittings are excluded.

No, export turnover is excluded when calculating turnover for MSME classification. Turnover and export figures are linked to Income Tax and GST data.

For new enterprises, an Aadhaar number is required for registration on the Udyam Registration portal. The specific Aadhaar needed depends on the business constitution (e.g., proprietor's Aadhaar for a proprietorship).

Yes, all enterprises previously registered under EM-Part-II or UAM must re-register on the Udyam Registration portal using the new criteria. Existing registrations are valid until March 31st, 2021.

Upon registration, enterprises receive a Udyam Registration Number (URN). They must then update their previous year's ITR and GST return details on the portal. Failure to do so within the prescribed time may lead to suspension of their MSME status.