Table of Contents
What is MSME?
Micro, Small, and Medium Enterprises form the backbone of India’s economic landscape, contributing significantly to employment generation, industrial production, and exports. In recent years, the government has been taking proactive measures to empower and uplift the MSME sector, recognizing its pivotal role in fostering economic growth and development.
Entities meeting the MSME classification criteria for annual turnover and investment are eligible to apply for MSME registration. This includes manufacturing, service industries, wholesale, and retail trade sectors.
Latest Criteria for MSME Classification
In the dynamic landscape of Indian business, the classification of enterprises into micro, small, or medium categories is a crucial determinant. Let’s dig into the factors that determine the classifications of MSMEs:
- Micro Enterprise
- Plant and machinery or equipment investment not exceeding one crore rupees.
- Turnover not exceeding five crore rupees.
- Small Enterprise
- Plant and machinery or equipment investment not exceeding ten crore rupees.
- Turnover not exceeding fifty crore rupees.
- Medium Enterprise
- Plant and machinery or equipment investment not exceeding fifty crore rupees.
- Turnover not exceeding two hundred and fifty crore rupees.
An integral aspect is the composite criterion, where a balance between investment and turnover plays an important role in the classification. If an enterprise surpasses the ceiling limits in either investment or turnover for its current category, it automatically moves to the next higher category. However, a downward shift is only possible if the enterprise falls below the specified limits in both investment and turnover criteria.
A noteworthy consideration is the collective treatment of all the units sharing the same Goods and Services Tax Identification Number (GSTIN) under a single Permanent Account Number (PAN). In such cases, the cumulative turnover and investment figures of all associated entities are evaluated collectively. The resultant aggregate values of all such units together then dictate whether the enterprise falls into the micro, small, or medium category.
How To Calculate Investment in Plant and Machinery or Equipment
In determining the value of investment in plant and machinery or equipment for Micro, Small, and Medium Enterprises, a strategic link to the Income Tax Return (ITR) of previous years is established. Hence, the value of investment in plant and machinery or equipment from previous year ITR is considered
For new enterprises without a preceding ITR, the investment calculation relies on the self-declaration furnished by the enterprise’s promoter. However, this is time-bound, as it ceases after the culmination of the financial year in which the enterprise files its first ITR, emphasizing the transition to a more established financial reporting framework.
Clarifying the scope, the term “plant and machinery or equipment” aligns with the definition outlined in the Income Tax Rules, 1962, framed under the Income Tax Act, 1961. This includes all tangible assets, excluding land and building, furniture and fittings.
When evaluating the purchase (invoice) value of plant and machinery or equipment, whether acquired firsthand or second hand, the value is considered exclusive of Goods and Services Tax (GST). This is applicable under the self-disclosure mechanism, particularly for new enterprises lacking any ITR history.
How To Calculate Turnover
Exports of goods or services are excluded from the calculation of turnover when determining the classification of an enterprise.
Details pertaining to turnover and export turnover for an enterprise will be correlated with the provisions outlined in the Income Tax Act or the Central Goods and Services Act (CGST Act), along with the corresponding Goods and Services Tax Identification Number (GSTIN).
What is Udyam Registration
Udyam registration, commonly known as MSME registration, is a process available for entities meeting the MSME classification criteria. Eligible businesses can initiate the MSME registration through the dedicated government portal. The entire registration process is conducted online, exclusively through the Udyam registration portal. While obtaining MSME registration is not compulsory, it is highly advantageous for businesses. This registration offers various benefits, including favorable tax considerations, streamlined business establishment procedures, access to credit facilities, and the opportunity to secure loans, making it a valuable choice for enterprises.
Documents Required for MSME Registration
The following documents are required for MSME Registration:
- Aadhaar number of the authorized representative.
- PAN Card of the Enterprise
Process for MSME Registration for New Enterprises
MSME Registration process is very simple and online. It can be easily done by following the below mentioned steps:
- Visit Udyam Registration Portal at: https://udyamregistration.gov.in/
- Click on the tab for registration labelled as “For New Entrepreneurs who are not Registered yet as MSME or those with EM-II.”
- After clicking the above-mentioned tab, a new window will open. Enter the aadhaar number and verify it by submitting the OTP received on the aadhaar linked mobile number or email id.
- The Aadhaar number must belong to the proprietor in the case of a proprietorship firm, the managing partner in the case of a partnership firm, and the karta in the case of a Hindu Undivided Family (HUF).
- For a Company, Limited Liability Partnership, Cooperative Society, Society, or Trust, the organization or its authorized signatory is required to furnish both its GSTIN and PAN, along with the corresponding Aadhaar number.
- Fill the form and submit by OTP Verification.
- An Enterprise cannot file more than 1 Udyam Registration.
- You can print the Udyam Registration Certificate from the link: https://udyamregistration.gov.in/Udyam_Login.aspx
- Udyam Registration certificate is also known as “Udyam”.
Process for MSME Registration of Enterprises already registered under EM–Part-II or UAM
All the enterprises that have existing registration under EM-Part-II or UAM shall follow the below mentioned procedure:
- Visit Udyam Registration Portal at: https://udyamregistration.gov.in/
- Click on the tab for registration labelled as “For those already having registration as UAM”
- After clicking the above-mentioned tab, a new window will open. Enter the aadhaar number and verify it by submitting the OTP received on the aadhaar linked mobile number or email id.
- Fill the form and submit by OTP Verification.
- You can print the Udyam Registration Certificate from the link: https://udyamregistration.gov.in/Udyam_Login.aspx
- Udyam Registration certificate is also known as “Udyam”.
Important Points Regarding Udyam/MSME Registration
- There is no government fees for Udyam Registration.
- The entire Udyam Registration process is online.
- Aadhar number and PAN Card are mandatory.
- OTP verification is required from the phone number or email id linked to the aadhaar number.
- GST number is not mandatory.
- Udyam Registration once issued is valid for lifetime and needs no renewal.
- Once issued, MSME Registration cannot be cancelled.
- Udyam Registration is completed as soon as the relevant information is submitted in the form and can be downloaded online at the same time.
- Udyam Registration is not mandatory for small, medium and micro enterprises.
- Udyam Registration is valid for manufacturers, service providers and traders.
Benefits of MSME Registration
Udyam Registration comes with a multitude of benefits. The following are some of these benefits:
- MSMEs have access to loans without the need for collateral security.
- Securing a business loan becomes more accessible for MSMEs, with interest rates up to 1.5 percent lower than standard business loans.
- Entrepreneurs can take advantage of the excise exemption scheme, receiving direct tax exemptions in the initial years of their business.
- Those enrolled on the Udyam portal can enjoy concessions on monthly electricity bills, helping to conserve valuable resources.
- MSMEs are eligible to participate in government tenders, benefiting from exemptions during the application process.
- The central government has rolled out several advantageous schemes for MSMEs, including Atma Nirbhar Bharat, credit guarantee schemes, quality management standards, technology tools, support for women entrepreneurs and initiatives like zero effect and zero defect.
- MSMEs are granted the opportunity to showcase their products and services to a broader global audience by participating in international fairs and trade shows.
- Concessions on trademark, patent, and design registration fees are provided to MSMEs.
Conclusion
In the dynamic world of business, MSME Registration emerges as a cornerstone for growth, offering a spectrum of benefits that go beyond financial considerations. Empowering businesses with financial support, tax incentives, global exposure, and intellectual property protection, MSME Registration acts as a catalyst for small enterprises to thrive and contribute substantially to the economic landscape. It’s not just a registration; it’s a pathway to sustained success and recognition in the competitive business realm.
