The Government of India has established Udyam Registration for businesses that are involved in the manufacture, manufacturing, processing, or preservation of products, or in the providing or rendering of services. In other words, businesses that are only engaged in trade, such as purchasing, selling, importing, or exporting items, are ineligible for Udyam Registration.
By notice on June 26, 2020, the Ministry of Micro, Small, and Medium Enterprises announced the establishment of a new categorization for MSME Enterprises called Udyam Registration, which would begin on July 1, 2020. The site has been created in a very simple format so that the entrepreneur can understand all of the specifics of the registration process, including what they need to know and what they should do.
The Central Government established an advisory group to provide suggestions for a new categorization of companies as micro, small, and medium, and after receiving proposals, the CG defined the new MSME classification, which would take effect on July 1, 2020.
Udyam Registration (Micro, Small, and Medium Enterprises): A New Classification:
- A micro-enterprise is one with a plant and machinery or equipment investment of less than 1 crore rupees and a turnover of less than 5 crore rupees.
- A Small businesses with a plant and machinery or equipment investment of less than 10 crore rupees and sales of less than 50 crore rupees.
- A medium enterprise, defined as one with a plant and machinery or equipment investment of less than 50 crore rupees and revenue of less than 250 crore rupees.
Methodology for Calculation:
- Investment in plant, machinery, and equipment
- The investment in plant and machinery or equipment must be linked to the previous year’s Income Tax Return, as required by the Income Tax Act of 1961.
- In the event of a new business where no Income Tax Return has been filed, the investment will be based on the promoter’s self-declaration and will terminate on the 31st of March of the Financial Year, i.e. on the filing of the First ITR.
- The terms “plant and machinery” and “machinery” have the same meaning as in the Income Tax Act of 1961.
- If the business is new, the invoice value shall be regarded the purchase price, regardless of whether the items are new or used, and shall be taken into account on a self-disclosure basis, omitting the Goods and Service Tax Act.
- Turnover
- Exports of products or services, or both, are omitted from the calculation of an enterprise’s turnover for categorization reasons, whether it is micro, small, or medium.
- To link information about the enterprise’s turnover and export turnover, the Income Tax Act or the Central Goods and Service Tax Act, as well as the GSTIN, will be employed.
- For the period up to 31 March 2021, the turnover-related data of such businesses that do not have a PAN will be examined on a self-declaration basis, after which it will be required to have a PAN.
The following are some of the advantages of being an Udyam:
- It’s simpler to secure government contracts if you register with Udyam.
- Bank loans become less expensive as a result of the Udyam since the interest rate is so low. A variety of tax advantages are available to Udyam.
- It has become much easier to get permits, approvals, and registrations, regardless of the type of the firm, because Udyam-registered businesses are given priority for government licenses and certification.
- They are easily granted credit at extremely cheap interest rates.
- Udyams who are registered are eligible for tariff and capital subsidies.
- Once it is registered, the cost of obtaining a patent or establishing an enterprise is reduced due to the numerous tax refunds offered by the Internal Revenue Service.
Period of information updating and classification transition:
- If an enterprise’s current category is changed as a result of reverse graduation, reclassification, or actual changes in investment in plant and machinery or equipment or turnover, or both, whether it is registered or not under the act, the new classification will take effect on April 1 of the following year, not the day the change occurred, and the entity will have to register again.
- If the required information is not updated within the timeframe specified in the online Udyam Registration portal, its status will be suspended.
- The categorization of the business is updated based on information provided or obtained from government sources, such as ITRs or GST returns, and will take effect on July 1, 2020.
- In the event of an enterprise’s graduation or reverse-graduation, notification of the change in status will be provided to the company.
- If an enterprise’s investment in plant and machinery or equipment, or its turnover, or both, rises, its existing status will be maintained until the end of the year in which it was registered.
The firm that already has an Udyam Registration Number will update its information, including ITR and GST Return details from previous years, online at the Udyam Registration portal.
