Finance to Micro & Small Enterprises
Ministry of MSME vide Gazette of India, Extraordinary, Part II, Section-3, Sub-section (ii), No. 1532 dated 01/06/20 has revised the definition of Micro, Small and Medium Enterprises to give them the confidence to grow. Under the new definition of MSMEs:
- The distinction between Manufacturing and Services Enterprises has been eliminated.
- The investment criteria for such enterprises have been revised upwards, while an additional criterion of turnover has been introduced.
Criteria | Micro | Small | Medium |
Investment in Plant & Machinery or Equipment | Does not exceed Rs 1 Crore | Does not exceed Rs 10 Crore | Does not exceed Rs 50 Crore |
Annual Turnover | Does not exceed Rs 5 Crore | Does not exceed Rs 50 Crore | Does not exceed Rs 250 Crore |
Further, Ministry of MSME and RBI has notified certain guidelines/clarifications regarding classification of enterprises as Micro, Small and Medium Enterprises and specifies the form and procedure for filing Udyam Registration with effect from 01/07/20 as detailed hereunder.
- Becoming a Micro, Small or Medium Enterprise
- Any person who intends to establish a Micro, Small or Medium Enterprise may file Udyam Registration online in the Udyam Registration Portal, based on self-declaration with no requirement to upload documents, papers, certificates or proof.
- On registration, an enterprise (referred to as “Udyam” in the Udyam Registration Portal) will be assigned a permanent identity number to be known as “Udyam Registration Number”.
- An e-certificate, namely, “Udyam Registration Certificate” shall be issued on completion of the registration process.
- Composite criteria of Investment and Turnover for classification
- A composite criterion of investment and turnover shall apply for classification of an enterprise as Micro, Small or Medium.
- 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.
- 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
- The calculation of investment in Plant and Machinery or Equipment will be linked to the Income Tax Return (ITR) of the previous year’s filed under the Income Tax Act, 1961.
- 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.
- 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).
- 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.
- 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.
- The value of Plant and Machinery or Equipment mean the Written Down Value (WDV) as at the end of the Financial Year as defined in the Income Tax Act and not cost of acquisition or original price, which was applicable in the context of the earlier classification criteria.
- Calculation of Turnover
- 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.
- 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.
- 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.
CATEGORIZATION OF ACTIVITIES UNDER MANUFACTURING OR SERVICES UNDER THE MSMED ACT 2006 -
MSE-Manufacturing | MSE-Services |
Loans given to enterprises engaged in the manufacture or production, processing or preservation of goods in general including the following :
(The activity of Bee Keeping is farming allied activity and therefore, would not be covered in either manufacturing and service activity Piggery farm without bacon processing shall not be classified either as manufacturing or as service enterprise because this is a farming activity)
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Loans given to enterprises engaged in providing or rendering of services in general including the following :
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The above list is illustrative and not exhaustive. For further Information please contact nearest Branch