Reclassification of MSME- GOI Notification 26.06.2020- Ministry of Micro, Small And Medium Enterprises

In exercise of the powers conferred by Section 7 (9) (1) and Section 8 (2) and (1) of the Micro, Small and Medium Enterprise Development Act, 2006, the Central Government has, vide its notification dated 26.06.2020, notified certain criteria for classifying the enterprises as micro, small and medium enterprises and also specifies the form and procedure for filing the memorandum (Udyam Registration), w.e.f. 01.07.2020.

1. Classification of enterprise

2. Becoming a micro, small or medium enterprise.

Any person who intends to establish a MSME may file ‘Udhyam Registration’ online in the Udhyam Registration portal, based on self declaration with no requirement to upload documents, papers, certificates or proof. On registration, an enterprise will be assigned a permanent identity number to be known as “Udhyam Registration Number”. An E-certification, namely- Udhyam Registration Certificate shall be issued on completing of the registration process.

3. Composite criteria of investment and turnover for classification.

If an enterprise crosses the ceiling, as specified above, 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. All units with GSTIN listed against the same PAN shall be collectively treated as one enterprise and the turnover and investment figures for all such entitles shall be seen together and only aggregate values will be considered for deciding the category as micro, small or medium enterprise.

4. Calculation of investment in Plant & Machinery or Equipment.

The calculation of investment in Plant & Machinery or Equipment would be linked to ITR. In case of a new enterprise, where there is no ITR, the calculation would be made on the basis of the self declaration of the promoter and such relaxation would be available up till 31^st March of the F.Y. in which it files its first ITR. The expression ‘Plant & Machinery or Equipment’ of the enterprise, shall have the same meaning as assigned under the Income Tax Rules, 1962. The purchase (invoice) value of Plant & Machinery or equipment, shall be taken into consideration under self disclosure mode. The cost of certain items specified in the Explanation I to Section 7 (1) of the MSMED Act, 2006 shall be excluded from the calculation of the amount of investment in plant and machinery.

5. Calculation of turnover. 

Exports of goods or services or both, shall be excluded. Information as regards turnover and exports turnover for an enterprise shall be linked to the Income Tax Act or the CGST and the GSTIN. The turnover related figures if such enterprise which do not have PAN will be considered on self declaration basis for a period up to 31.03.2021 and thereafter, PAN and GSTIN shall be mandatory.

6. Registration Process.

The form for registration shall be as provided in the Udyam Registration portal. There will be no fee for filing Udyam Registration. Aadhaar number shall be required for Udyam Registration. The Aadhaar number shall be of the proprietor in the case of a proprietorship firm, of the managing partner in the case of a partnership firm and of a karta in the case of a Hindu Undivided Family (HUF). In case of a Company or a Limited Liability Partnership or a Cooperative Society or a Society or a Trust, the organisation or its authorised signatory shall provide its GSTIN and PAN along with its Aadhaar number. 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. 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. 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.

7. Registration of existing enterprises.

All existing enterprises registered under EM–Part-II or UAM shall register again on the Udyam Registration portal on or after the 1 st day of July, 2020. All enterprises registered till 30th June, 2020, shall be re-classified in accordance with this notification. The existing enterprises registered prior to 30th June, 2020, shall continue to be valid only for a period up to the 31stday of March, 2021.

8. Updation of information and transition period in classification.

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 selfdeclaration 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. 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 one year from the close of the year of registration. 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.

9. Facilitation and grievance redressal of enterprises.

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 handholding the micro, small and medium enterprises in all possible manner. The District Industries Centres (DICs) will also act as Single Window facilitation Systems in their Districts. 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 with his Aadhaar enrolment identity slip or copy of Aadhaar enrolment request or bank photo pass book or voter identity card or passport or driving licence and the Single Window Systems will facilitate the process including getting an Aadhaar number and thereafter in the further process of Udyam Registration. 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 and thereafter forward the matter with necessary remarks to the Director or Commissioner or Industry Secretary concerned of the State Government who 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.