After china, india has the world largest micro, small and medium enterprise base. Micro, small and medium enterprise contribute significantly in the economic and social development of the country by way of entrepreneurship and inclusive growth.
According to the national statistical agency the micro, small and medium enterprise sector accounts for a significant portion of the country gross domestic product total gross domestic product during the year 2018 to the year 2019 has been 30.3 per cent. The government of india has always laid special emphasis on the growth and development of this sector and a recent step was the introduction of udyam registration for micro, small and medium enterprise effective 1st of july, 2020 a simplified process of micro, small and medium enterprise registration from udyog aadhaar memorandum and entrepreneur memorandum part two.
This article will enlighten the procedure and requirement for udyam registration applicable for micro, small and medium enterprise along with the revised definition of classification of an enterprise as micro, small and medium enterprise.
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Classification of enterprise as micro, small and medium enterprise from 1st of july, 2020.
The governing law for an enterprise to be categorized as micro, small and medium enterprise has been defined in micro, small and medium enterprise development act notified in 2006. This act seeks to facilitate the development of these enterprise as also enhance their competitiveness through various schemes, privileges and other benefits from government of india.
During the month of may 2020, while delivering the economic package as part of the aatmanirbhar bharat abhiyaan finance minister nirmala sitaraman announced revisions in the definition of micro, small and medium enterprise which was then officially notified in june 2020 to be effective from 1st of july, 2020. Earlier the micro, small and medium enterprise were defined on the basis of investment put in now the revised definitions will also include turnover of the company. Also the revised definition would consider both manufacturing and service enterprise under a common metric.
It should be noted that if an organization exceeds the maximum restrictions set for its current category in either investment and turnover it will cease to exist in that category and will be moved to the next higher one. However no firm shall be put in a lower category until it falls below the ceiling restrictions set for its current category in terms of both investment and turnover.
Considerations for computing the value of investment and annual turnover.
The following shall be considered while computing the value of investment in plant and machinery and annual turnover for an enterprise.
The expression plant and machinery of the enterprise shall have the same meaning as assigned to the plant and machinery in the income tax rules, 1962 framed under the income tax rules, 1961 and shall include all tangible assets. The cost of certain items mentioned in explanation one to sub section of section seven of the micro, small and medium enterprise act shall be excluded for arriving at the amount of investment in plant and machinery.
Value of a plant and machinery, whether purchased first hand and second hand, shall be taken into account excluding goods and services tax.
Exports of goods and services are not included in the calculation of any enterprise turnover for classification purpose whether micro, small and medium. More units would eventually profit from this.
The data on plant and machinery will be linked to the income tax act, central goods services tax act and the goods services tax identification number where the enterprise is existing one and has filed the returns as may be applicable in the respective acts mentioned.
Where the enterprise is new and do not have permanent account number and goods services tax the information on investment in plant and machinery and turnover shall be considered on self declaration basis for a period upto 31st of march 2021 and thereafter permanent account number and goods service tax identification number shall be mandatory. Hence its understood that from 1st of april, 2021 registration as micro, small and medium enterprise would be possible only for those enterprises holding permanent account number and goods services tax identification number.
Benefits of registering as an udyam.
Although the governing act does not make the micro, small and medium enterprise registration as mandatory and in many cases the need for micro, small and medium enterprise registration would be called, only for the purpose of compliance and disclosure requirement of any other governing acts like companies act 2013. However an enterprise that is registered under the stated act would be able to take use of the benefits and privileges that the government has announced at the time.
Therefore by getting registered under udyam registration portal, the micro, small and medium enterprise through the stimulus package could avail collateral free automatic loans and electronic market linkages across the board to provide marketing opportunities protection against delayed payments on material supplied, get benefits of financial assistance at lower interest rates, tax rebates, preference while issuing government tenders, subsidy on electricity, subsidy on patent and barcode registration and benefit to receive the payments within a period of 45 days and many other privileges as well as exemptions.
Udyam registration process.
For registration an enterprise needs to follow the following.
Any person who intends to establish as a micro, small and medium enterprise may file udyam registration online in the udyam registration portal and based on self declaration with no requirement to upload documents and papers and certificates and proof.
The new udyam registration is a life time registration for an micro, small and medium enterprise in comparison with the udyog aadhaar memorandum and enterepreneur memorandum one and two which required renewals.
Registration for udyam will be free of charge.
In the udyam registration portal, there is a simplified registration form https://udyamregistration.gov.in. Where the enterprise has goods service tax identification number and on keying in the same, the name, location and bank details of the enterprise would be extracted from the goods services tax portal.
Udyam registration will require an aadhaar number. In the case of a proprietorship firm the managing partner aadhaar number should be used in the case of a partnership firm and of a karta in the case of a hindu undivided family. In the case of a company and a limited liability partnership and a cooperative society and a society and a trust and the organization and its authorized signatory shall provide its goods services tax identification number and permanent account number along with its aadhaar number.
Also read udyog aadhaar print.
A permanent identifying number known as the udyam registration number will be provided to an enterprise upon registration.
After the registration process is completed an electronic certificate called udyam registration certificate will be issued.
In case an enterprise is duly registered as an udyam with permanent account number, any deficiency of information for previous years when it did not have permanent account number 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 and service and both may be specified and added in one udyam registration. The creation and harmonious application of modern processes for increasing the output and national strength champions control rooms functioning in various institutions and offices of the ministry of micro, small and medium enterprise including the development institutes and district industries centres shall act as single window systems for facilitating the registration process and further support for the micro, small and medium enterprise in all possible manner.