ANALYSIS OF NEW MSME GUIDELINES (NOTIFIED)

Ministry of Micro, Small and Medium Enterprises Notifies the New Guidelines for the MSMEs in Official Gazette ID No. CG-DL-E-26062020-220191  dated 26^th June 2020, under which they have specified the New Classification, Composite criteria of investment and turnover for classification, Calculation of investment in plant and machinery or equipment, Calculation of turnover, Registration process, Registration of existing enterprises, Updation of information and transition period in classification as it is difficult to understand the notification so our team has made it in simple manner.

As we have already mentioned in our previous write up “All About MSMEs” the New Classification has already been mentioned and various other things have already been delivered to you, most of the things are not different from that write up which is also mentioned below for your understanding.

Analysis of Complete Guideline: –

In the New Guidelines various process of registration has been streamline and simplified, along with that the department has linked this with Adhaar, GSTIN and PAN for correlation of their declaration of investment and Turnover with the information furnished in the ITR and GST Returns. Due to which the enterprise is required to cross check the declaration made to the department otherwise there could be suspension of their status of MSME.

Further there is requirement of reregistration of existing MSME enterprise to the Udyam Registration portal, so as to get the latest data and adhering to the new classification of MSME imposed by the government/department.

Furthermore there is need for updation of information related to turnover and Investment in Plant and Machinery at the relevant intervals which are to be specified by the department and time limits to be set for updation.

So here is the detailed Notification, first we will talk about the Existing MSME registered enterprises: –

• Registration of existing enterprises: –
  • All existing enterprises registered under EM–Part-II or Udyog Adhaar Memorandum shall register again on the Udyam Registration portal on or after the 1st 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.
  • An enterprise registered with any other organisation under the Ministry of Micro, Small and Medium Enterprises shall register itself under Udyam Registration.

• Classification of Enterprises: –

• Simplified Process: –

Any person who intend to take registration under MSMEs is only required to give self declaration with Adhaar Number and OTP, there is no requirement to upload any documents, papers or certificates, after registering on the portal a permanent identity number will be assigned to the Enterprise which will be Udyam Registration Number and a Registration certificate will be issued on completing the registration process.

• Criteria of Investment and Turnover: –

• Either of the two conditions mentioned in the classification of enterprise is met then condition for next category is to be checked, both the conditions i.e. for Investment in Plant and Machinery and turnover is required to be checked.
• Further All units with Goods and Services Tax Identification Number (GSTIN) listed against the same Permanent Account Number (PAN) shall be collectively treated as one enterprise and 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.

• Calculation of Investment in Plant and Machinery: –

• • As per the new guidelines calculation of investment in plant and machinery or equipment will be linked to the Income Tax Return (ITR) of the previous years filed, where no prior ITR is available, the investment will be based on self-declaration of the promoter of the enterprise.
  • Plant and Machinery definition shall include all the Tangible Assets (Other than Land Building, Furniture and fittings) whether purchased first or Second hand (GST Amount shall be excluded while computing amount of investment).
  • Further for computation of amount of Investment cost of pollution control, research and development, industrial safety devices and such other items as may be specified, by notification, shall be excluded.

• Calculation of Turnover: –
  • As per the new guidelines the Exports of goods or services or both, shall be excluded while calculating the turnover, information given in the registration shall be linked with the data of Income Tax or GST.
  • The Person do not have PAN shall require to give self-declaration up to 31^st March, 2021 thereafter PAN and GSTIN shall be mandatory.

• 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.

• Updation of information and transition period in classification
  • This is the new Concept under the New Guidelines of MSMEs the enterprise is required to update the details of ITR and GST Return for the previous financial year as per the instructions of Udyog Adhaar and further notifications on udyam registration portal. Failure to which enterprise is liable for suspension of its status.
  • Based on the information sumitted by the enterprise and gathered from the government source classification of the enterprise will be determined.
  • In Case of any updation in the classification (I.e. Upgradation or degradation) of the enterprise from Micro to Small or Medium and vice versa, the enterprise must send a communication of change in status to department.
  • In case of an upward change in terms of investment in plant and machinery or equipment or turnover or both, and consequent re-classification (From Micro to Small or Medium, Small to Medium), 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, the enterprise will continue in its present category till the closure of the financial year and benefit of the new classification will be effective from 1st April of the financial year following the year in which such change took place.

• Facilitation and grievance redressal of enterprises: –

As per new Guidelines there will be single window facilitation system for registration process, queries related to Adhaar number and any other grievance of the enterprise.

For any assistance in respect to MSME registration, Guidance and other benefits of it you can contact at the details mentioned in the footnote. We are team of well trained and experienced professionals which could handle each and every situation.

Following information is required to be kept in hand for registration under MSME as per the new guidelines; –

1. Aadhaar Number (Adhaar Should Be Updated with Mobile Number on which OTP could be available)
2. Owners Information
3. Social Category- (General, Scheduled Caste, Scheduled Tribe or Other Backward Castes (OBC). The proof of belonging to SC, ST or OBC may be asked by appropriate authority, if and when required.
4. Gender
5. If Physically Handicapped (Prescribed Letter is required)
6. Name of Enterprise (Legal Name of Business)- One applicant can have more than one enterprises doing business and each one can be registered for a separate Udyog Aadhaar and with the same Aadhaar Number as Enterprise 1 and Enterprise 2 etc.
7. Type of Organization- (Proprietor, Firm, Private Limited Company etc.)
8. PAN Number (PAN Card Copy is required to be kept if department requires)
9. Location of Plant/Office (Electricity Bill, Telephone Bill is required to be kept if department requires)
10. Official Address (Electricity Bill, Telephone Bill is required to be kept if department requires)
11. Date of Commencement – Date of Commencement of Business could be from PAN or any other based on situation.
12. Previous Registration Details (if any)- If the Applicant’s enterprise, for which the Udyog Aadhaar is being applied, is already issued a valid EM-I/II by the concerned GM (DIC) as per the MSMED Act 2006 or the SSI registration prevailing prior to the said Act, such number may be mentioned in the appropriate place.
13. Bank Details (Cancelled Cheque or Statement of Account is required with IFSC and Account Number of the Enterprise)
14. Major Activity- The major activity i.e. either “Manufacturing” or “Service” is required to be disclosed.
15. National Industry Classification Code (NIC Code)- These are the codes which is required to be mentioned in the Registration which are relevant to your industry, which is major activity of the business,
16. Person employed- The total number of people who are directly been paid salary/ wages by the enterprise may be mentioned.
17. lnvestment in Plant & Machinery / Equipment- As per Last year’s ITR and GSt Returns.

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Disclaimer: – The information compiled are my personal observation and Interpretation of the Small & Medium Enterprises Development (MSMED) Act, 2006 and further notifications issued by Ministry of Micro, Small & Medium Enterprises, further information is updated till the date of Publish of this document i.e. on 28^th June, 2020, any further changes due to subsequent notifications shall accordingly be applied The Author and publisher disclaim any liability in connection with use of this information.

CA Akshaya Deep

Chartered Accountant and Experienced Professional with a demonstrated history of working in the financial services industry.