MSME (w.e.f. July 1, 2020) certain criteria for classifying the enterprises as micro, small and medium enterprises and basis for calculation of Investment and Turnover

MINISTRY OF MICRO, SMALL AND MEDIUM ENTERPRISES vide notification No. S.O. 2119(E) dated 26^th June 2020 notified certain criteria for classifying the enterprises as micro, small and medium enterprises and specifies the form and procedure for filing the memorandum (“Udyam Registration”), with effect from the 1st day of July, 2020

CLASSIFICATION OF ENTERPRISES

Manufacturing Unit or Service Unit can be registered under MSMED Act, 2006 and will be classified as per their investment in plant and machinery or equipments and their turnover:

Type of Enterprises	Criteria ** for Manufacturing Enterprise and Services Enterprises ( W.e.f. July 1, 2020)
Micro	Investment < Rs. 1 Crore AND Turnover < Rs. 5 Crores
Small	Investment < Rs. 10 Crore AND Turnover < Rs. 50 Crores
Medium	Investment < Rs. 50 Crore AND Turnover < Rs. 250 Crores

COMPOSITE CRITERIA OF INVESTMENT AND TURNOVER FOR CLASSIFICATION

(1)     A composite criterion of investment and turnover shall apply for classification of an enterprise as micro, small or medium.

(2)     If an enterprise crosses the ceiling limits specified 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 but no enterprise shall be placed in the lower category unless it goes below the ceiling limits specified for its present category in both the criteria of investment as well as turnover.

(3)     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 OR EQUIPMENT

(1)     The calculation of investment in plant and machinery or equipment will be linked to the Income Tax Return (ITR) of the previous years filed under the Income Tax Act, 1961.

(2)     In case of a new enterprise, where no prior ITR is available, the investment will be based on self-declaration of the promoter of the enterprise and such relaxation shall end after the 31st March of the financial year in which it files its first ITR.

(3)     The expression “plant and machinery or equipment” 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 Act, 1961 and shall include all tangible assets (other than land and building, furniture and fittings).

(4)     The purchase (invoice) value of a plant and machinery or equipment, whether purchased first hand or second hand, shall be taken into account excluding Goods and Services Tax (GST), on self-disclosure basis, if the enterprise is a new one without any ITR.

(5)     The cost of certain items specified in the Explanation I to sub-section (1) of section 7 of the Act shall be excluded from the calculation of the amount of investment in plant and machinery.

CALCULATION OF TURNOVER

(1)     Exports of goods or services or both, shall be excluded while calculating the turnover of any enterprise whether micro, small or medium, for the purposes of classification.

(2)     Information as regards turnover and exports turnover for an enterprise shall be linked to the Income Tax Act or the Central Goods and Services Act (CGST Act) and the GSTIN.

(3)  The turnover related figures of such enterprise which do not have PAN will be considered on self-declaration basis for a period up to 31st March, 2021 and thereafter, PAN and GSTIN shall be mandatory.

REGISTRATION OF EXISTING ENTERPRISES

(1) All existing enterprises registered under EM–Part-II or UAM (Udyog Aadhar Memorandum) shall register again on the Udyam Registration portal on or after the 1^st day of July, 2020.

(2)     All enterprises registered till 30^th June, 2020, shall be re-classified in accordance with this notification.

(3)     The existing enterprises registered prior to 30^th June, 2020, shall continue to be valid only for a period up to the 31stday of March, 2021.

(4)     An enterprise registered with any other organisation under the Ministry of Micro, Small and Medium Enterprises shall register itself under Udyam Registration.

[Source: http://egazette.nic.in/WriteReadData/2020/220191.pdf ]

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The material and information contained in this blog are for general information purpose only.  Though we have made every efforts to make our interpretation correctly, we do not make representation either express or implied about the completeness or correctness of the subject matter.  Under no circumstances the author is not responsible / liable for any loss or damage caused to anyone due to any mistake / error / omissions.