MSME clarification on New Udyam Registration

Ashish M. Shaji

23 Nov, 2020

The Ministry of Micro, Small and Medium Enterprises (MSMEs) issued a clarification on existing Entrepreneurs Memorandum (EM) Part-II/ Udyog Aadhaar Memorandum; vide Office Memorandum dated 6^th August 2020. 

The revised procedure and the criteria for the classification of enterprises as Micro, Small and Medium Enterprises and their registration in Udyam were announced earlier on 26^th June 2020. 

What does the notification date 26^th June 2020 deal with?

According to the notification, the ministry has classified the entity as MSME based on the investment in plant and machinery or equipment, and if a person is willing to establish an MSME, they should file Udyam Registration online.

The notification also deals with the following:

• Composite criteria of investment and turnover for classification;
• Calculation of investment in plant and machinery or equipment;
• Calculation of turnover;
• Registration process of Udyam MSME;
• Existing enterprises registration;
• Updation of information and transition period in Udyam portal; and
• Enterprises facilitation and grievance redressal.

What is Entrepreneurs Memorandum (EM), Udyog Aadhaar Memorandum, and New Udyam Registration?

Before we know about Clarification on New Udyam Registration, understanding the following is essential:

• Entrepreneurs Memorandum (EM)

The Entrepreneurs Memorandum (EM) part II enables the entrepreneurs to avail of the benefits of different incentives under the Central and State Government. It should be filed within six months from the date of commercial production.

• Udyog Aadhaar Memorandum

Udyog Aadhaar Memorandum is a one-page registration form that constitutes a self-declaration format under which the MSME shall certify its existence, details of bank account, Aadhaar details of promoter/owner, and other information. 

• New Udyam Registration

An entrepreneur who seeks to establish a Micro, Small, and Medium Enterprise is required to file Udyam Registration online through the Udyam Registration portal. Upon registration, an enterprise will be assigned with an Udyam registration number and Udyam registration certificate.

Udyam Registration- Clarification on Existing EM Part II and UAM

The validity of Entrepreneurs Memorandum (EM) Part II and Udyog Aadhaar Memorandums (UAM)

All the existing EM Part II and UAMs obtained till 30^th June 2020 will remain valid until 31^st March 2021. Therefore before 31^st March 2021, they are required to register themselves on the Udyam portal to keep their registration valid thereafter.

Editing/Updating of the existing registration detail in Udyog Aadhaar Memorandum portal

The Ministry of MSME has also clarified that existing UAM holders can edit or amend the details on the UAM portal until 31^st March 2021. The firms that have not entered the Aadhaar or PAN number thus far in the UAM portal are advised to obtain the Udyam Registration Number before 31^st March 2021.

Action to be taken by the Entrepreneurs

It may be noted that existing registrations as Entrepreneurs Memorandum Part II and Udyog Aadhaar Memorandum shall not remain valid after 31^st March 2021; therefore, they are required to register themselves in the new Udyam Registration portal.

All enterprises registered until 30^th June 2020 will be reclassified following new definition, and enterprises are required to enter the latest details for proper and realistic classification. 

The Ministry notified that it is preferable that the entrepreneur files new registration in the Udyam Registration portal and further advised all enterprises with EM Part II and or UAMs to register themselves on the Udyam registration before 31st March 2021 in the Udyam Registration portal.

Value of Plant and Machinery or Equipment

There were many representations from the entrepreneur about the valuation of Plant and Machinery or Equipment on cost or price of purchase while filing the Udyam Registration, considering which MSME notified the procedure.

According to an earlier notification from the ministry dated 26^th June 2020 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 the expression plant and machinery also includes all tangible asset other than the land and building, furniture and fittings.

That online form for registration of Udyam captures depreciated cost as on March 31st every year of the relevant previous year. Therefore the value of Plant and Machinery or Equipment for all-purpose of the Notification No. S.O. 2119 (E) dated 26^th June 2020 and for all enterprises will mean the Written Down Value at the end of the financial year as mentioned in the Income Tax Act and not the cost of acquisition or original price, which was applicable in the context of the earlier classification criteria. 

What are some of the key highlights of the Udyam Registration Process?

The key highlights of the Udyam Registration Process are as follows:

• The entire registration process is free of cost. There is no need to pay any fee for the same.
• The registration process is online and paperless and based on self-declaration.
• Only Aadhaar number, which is required for registration and no documents or proof is needed to be uploaded for registration. The registration number shall be provided after the registration, and after the completion of the registration process, the Udyam Registration Certificate shall be issued.
• In case of a proprietorship firm the Aadhaar number of the proprietor and in case of a partnership firm the Aadhaar number of the managing partner, in case of a Hindu Undivided Family Aadhaar number of the Karta and in case of a Company or a Limited Liability Partnership or a co-operative society or a trust, GSTIN and PAN along with its Aadhaar number are required. 
• The Udyam registration Certificate shall have a dynamic QR code from which the details regarding the enterprise can be accessed.
• PAN and GST linked details on investment and turnover of enterprises shall be obtained automatically from the respective Government databases.
  
• The ministry of MSMEs’ online system shall be fully integrated with Income Tax and GSTIN systems.
• Enterprises having Entrepreneurs Memorandum (EM) Part-II/ Udyog Aadhaar Memorandum (UAM) registration or any other registration issued by any authority under the Ministry of Micro, Small, and Medium Enterprise, are also required to re-register themselves. 
• No enterprise can file more than one Udyam registration, but any amount of activities, including manufacturing or service or both, can be specified or added in one registration.   

Conclusion

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