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July 1, 2020

MSMEs Udyam registration to be applicable from July 1, 2020

by Rubina Dsouza in Compliance Law

MSMEs Udyam registration to be applicable from July 1, 2020

Introduction

The coronavirus pandemic has spelt crisis across the world as several countries now, curbing the rapid spread of the virus while dealing with the economic ramifications. COVID-19 has left its impact on all sectors of the economy but nowhere as severe as much as the Medium, Small and Micro Enterprises (MSMEs) of India. The thousands of stranded migrant workers across the country, suggests that MSMEs have been the worst casualty of COVID-19 induced lockdown.

Formally, MSMEs are defined in terms of investment in plant and machinery. But this criterion for the definition was long criticized because credible and precise details of investments were not easily available by authorities. Therefore in February 2018, the Union Cabinet decided to change the criterion to “annual turnover”, which was more in line with the imposition of GST.

The Central Government, after obtaining the recommendations of the Advisory Committee, has notified certain criteria for classifying the enterprises as micro, small and medium enterprises and has specified the form and procedure for filing the memorandum (Udyam Registration), with effect from 1st July, 2020.

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How can an enterprise be classified as a micro, small or medium enterprise?

An enterprise on the fulfillment of the below mentioned criteria shall be classified as a micro, small or medium enterprise:-

Classified asMaximum Investment in plant and machinery or equipmentMaximum Turnover
Micro enterpriseRs 1 croreRs 5 crore
Small enterpriseRs 10 croreRs 50 crore
Medium enterpriseRs 50 croreRs 250 crore
  1. If an enterprise crosses the ceiling limits specified for its present category in either of the two criteria of investment or turnover, it will cease to exist in that category and be placed in the next higher category.
  2. 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.
  3. All units with GSTIN listed against the same PAN shall be collectively treated as one enterprise and the turnover and investment figures for all of such entities shall be seen together.
  4. Only the aggregate values will be considered for deciding the category as micro, small or medium enterprise.
MSMEs Udyam registration to be applicable from July 1, 2020
MSMEs Udyam registration to be applicable from July 1, 2020

How does one register to become a micro, small or medium enterprise?

  1. Any person who intends to establish a micro, small or medium enterprise may file Udyam Registration online in the Udyam Registration portal on self-declaration. The site for registration of the same is http://www.udyamregistartion.gov.in
  2. There is no requirement to upload documents, papers, certificates or proof.
  3. There will be no fee for filing Udyam Registration
  4. Aadhaar number shall be required for Udyam Registration
  5. On registration, an enterprise (referred as Udyam  in the Udyam Registration portal) will be assigned a permanent identity number to be known as―Udyam Registration Number.
  6. An e-certificate, namely, ―Udyam Registration Certificate shall be issued on completion of the registration process.
  7. 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

Can existing enterprises register again on the Udyam Registration portal?

  1. All existing enterprises registered under EM–Part-II (Entrepreneurs Memorandum) or UAM (Udyog Aadhar Memorandum) shall register again on the Udyam Registration portal on or after the 1st July, 2020.
  2. All enterprises registered till 30th June, 2020, shall be re-classified in accordance with this notification.
  3. The existing enterprises registered prior to 30th June, 2020, shall continue to be valid up to 31st March,2021.
  4. An enterprise registered with any other organisation under the Ministry of Micro, Small and Medium Enterprises shall register itself under Udyam Registration.

Whose Aadhar number is to be considered while registration?

EntityAadhar Number of
Proprietorship firmProprietor
Partnership firmManaging Partner
Hindu Undivided Family (HUF)Karta
CompanyAuthorised signatory shall provide its GSTIN and PAN along with its Aadhaar number
Limited Liability PartnershipAuthorised signatory shall provide its GSTIN and PAN along with its Aadhaar number
Cooperative SocietyAuthorised signatory shall provide its GSTIN and PAN along with its Aadhaar number
SocietyAuthorised signatory shall provide its GSTIN and PAN along with its Aadhaar number
TrustAuthorised signatory shall provide its GSTIN and PAN along with its Aadhaar number

Can an entity file more than one Udyam Registration?

No enterprise shall file more than one Udyam Registration

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How do you compute investment in plant and machinery or equipment?

  1. Plant and machinery or equipment of the enterprise, shall have the same meaning as assigned to the plant and machinery in the Income Tax Rules, 1962. It shall include all tangible assets other than land and building, furniture and fittings.
  2. Calculation of investment in plant and machinery or equipment will be linked to the Income Tax Return (ITR) of the previous year filed under the Income Tax Act,1961.

How will amount of Plant & Machinery be computed in case of a new enterprise (no prior ITR is available)?

  1. In case of a new enterprise, where no prior ITR is available, investment will be based on self-declaration of the promoter of the enterprise.
  2. Such relaxation shall end after the 31st March of the financial year in which it files its first ITR.
  3. The purchase (invoice) value of a plant and machinery or equipment, whether purchased first hand or second hand, shall be taken into account excluding GST, on self-disclosure basis, if the enterprise is a new one without any ITR.

How is turnover computed?

  1. Information w.r.t turnover and exports turnover for an enterprise shall be linked to the Income Tax Act or the CGST Act and the GSTIN
  2. 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
  3. Exports of goods, services or both, shall be excluded while calculating the turnover of any enterprise whether micro, small or medium, for the purposes of classification

How does updation of status work on the Udyam Portal?

  1. 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.
  2. 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.
  3. Based on the information furnished or gathered from Government’s sources including ITR or GST return, the classification of the enterprise will be updated.
  4. 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.
  5. In case of an upward change in terms of investment in plant and machinery or equipment or turnover or both, and consequent re-classification, an enterprise will maintain its prevailing status till expiry of 1 year from the end of the year of registration.
  6. In case of reverse-graduation of an enterprise, whether as a result of re-classification or due to actual changes in investment in plant and machinery or equipment or turnover or both, and whether the enterprise is registered under the Act or not, the enterprise will continue in its present category till the closure of the financial year and it will be given the benefit of the changed status only with effect from 1st April of the financial year following the year in which such change took place.

Who is responsible for facilitation of the registration process?

  1. The Champions Control Rooms functioning in various institutions and offices of the Ministry of Micro, Small and Medium Enterprises including the Development Institutes (MSME-DI) shall act as Single Window Systems for facilitating the registration process and further handling of the micro, small and medium enterprises.
  2. The District Industries Centres (DICs) will also act as Single Window facilitation Systems in their Districts.

Is there any option available for lack of Aadhar number?

1.Any person who is not able to file the Udyam Registration for any reason including for lack of Aadhaar number, may approach any of the above Single Window Systems for Udyam Registration purposes.

2. Such person is to be accompanied with either of the following:-

i. his Aadhaar enrolment identity slip

ii. copy of Aadhaar enrolment request

iii. bank photo pass book

iv. voter identity card

v. passport

vi. driving license

3. The Single Window Systems will facilitate the process including getting an Aadhaar number and thereafter in the further process of Udyam Registration.

Is there any option of grievance redressal of enterprises?

  1. In case of any discrepancy or complaint, the General Manager of the District Industries Centre of the concerned District shall undertake an enquiry for verification of the details of Udyam Registration submitted by the enterprise.
  2. Thereafter the matter will be forwarded with necessary remarks to the Director or Commissioner or Industry Secretary concerned of the State Government.
  3. The Director or Commissioner or Industry Secretary after issuing a notice to the enterprise and after giving an opportunity to present its case and based on the findings, may amend the details or recommend to the Ministry of Micro, Small or Medium Enterprises, Government of India, for cancellation of the Udyam Registration Certificate.

Is there any penalty for contravention of the above mentioned provisions?

Whoever intentionally misrepresents or attempts to suppress the self-declared facts and figures appearing in the Udyam Registration or updation process shall be liable to such penalty as specified under section 27 of the Act.

Section 27 of the Micro, Small and Medium Enterprises Development Act, 2006 states the Penalty for contravention of section 8 or section 22 or section 26.

Whoever intentionally contravenes or attempts to contravene or abets the contravention of any of the provisions contained in section 8(1) or section 26(2) shall be punishable:-

  1. in the case of the first conviction, with fine which may extend to Rs 1000; and
  2. in the case of any second or subsequent conviction, with fine which shall not be less than Rs 1000 but may extend to Rs 10,000.

Where a buyer contravenes the provisions of section 22, he shall be punishable with a fine which shall not be less than Rs 10,000.

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