Udyam Registration...a step towards Atmnirbhar Bharat
For improving the pace of economic growth in India and to provide support to the industries amid the COVID-19 outbreak, the Government amended the Micro Small and Medium Enterprise (MSME) Development Act 2006, where the definition of MSME was renewed, as a part of Atmnirbhar Bharat which came into effect from 1st July 2020.
The new definition removed the distinction between the manufacturing and services and introduced new criteria for the distinction between the Micro, Small, and Medium Enterprise based on Turnover apart from the investment made in the plant and machinery.
The variations in the definition made were as follows:
Investment Criteria in plant and machinery:
Service: Up to Rs. 10 Lakh
Manufacturing: Up to Rs. 25 Lakh
Investment in plant and machinery: Does not exceed 1 Crore
Turnover: Does not exceed 5 Crore
Investment Criteria in plant and machinery:
Service: Up to Rs. 2 Crore
Manufacturing: Up to Rs. 5 Crore
Investment in plant and machinery: Does not exceed 10 Crore
Turnover: Does not exceed 50 Crore
Investment Criteria in plant and machinery:
Service: Up to Rs. 5 Crore
Manufacturing: Up to Rs. 10 Crore
Investment in plant and machinery: Does not exceed 50 Crore
Turnover: Does not exceed 200 Crore
From 1st July 2020, the composite criterion for the classification of the Micro, Small, and Medium Enterprise was made applicable. The definition was changed as a favorable benefit of the MSME, as the Companies would be able to avail the benefit of the small companies with the increase in their turnover, thereby giving the motivation to companies for expanding their business.
In case the Enterprises crosses the limit, specified in either of the criteria as mentioned in the law in such case the classification of the Enterprise will be done as per the criteria in higher limits.
Suppose an Enterprise has investment of Rs. 5 Crore in a plant and machinery for carrying out its operations and a turnover of Rs. 70 Crore in that case the enterprise will be classified as a medium enterprise.
The Government has brought out a full new System for the Udyam Registration.
To help MSME to revive in the difficult situation a new system CHAMPIONS was launched with the objective of Creation and Harmonious Application of Modern Processes for Increasing the Output and National Strength.
Registration under the MSME Act:
- A person willing to get himself registered under the new MSME Act, need to file online with a self-declaration on https://udyamregistration.gov.in/
- There is no registration fee.
- Adhaar Number would be required for getting registered if a proprietorship firm then of the proprietor, Managing Partner in case of a partnership firm, and Karta in the case of Hindu Undivided Family.
- In the case of Company/Limited Liability Partnership/Trust/Cooperative society PAN, Adhaar of the Organisation/Authorized Signatory along with GST Number will be required.
- On getting registered on the portal and Udyam Registration Number will be issued.
- Udyam Registration Certificate will be issued on the completion of registration.
- The CHAMPIONS control room function will act as a single-window system for facilitating the registration process at various institutions of MSME.
Registration in case of existing enterprise:
- Enterprises that were already registered as per Udyog Adhaar Memorandum need to get them registered again on https://udyamregistration.gov.in/ on or after 1st July 2020 though practically, it is not live yet as on date of this article.
- Reclassification of the already registered enterprise shall be done as per the new definition.
- An existing enterprise that was already registered till 30th June 2020 needs to get them re-registered, as the validity of old registration shall be only up to 31st March 2021.
Criteria for classification of Enterprises:
Investment in Plant & Machinery + Turnover = Criteria
Investment calculation in Plant & Machinery:
- An investment made in plant and machinery shall be considered as per the declaration made in the Income Tax Return, filed as per the Income Tax Act, 1961 of the previous year.
- In the case of a new Enterprise, the investment shall be considered as per declaration made by the promoter, which shall remain valid up tp filing of the first return.
- Plant and Machinery shall not include land & building and Furniture & Fitting.
- The value of Plant and Machinery shall be considered excluding its GST.
- Section 11B of the Industries (Development and Regulation) Act, 1951 shall also be considered. Whereby the nature of ownership in plant and machinery, land and building will be seen and nature, cost and quality of the product will be considered.
- The export of goods and services shall not be considered as a part of Turnover.
- Turnover information shall be linked with the Income Tax Act, 1961, Central Goods and Service Tax Act, 2017, and GSTIN.
- Yearly update of the information on the Udyam Registration portal by enterprises having Udyam Registration number.
- Failure in the timely submission of information by an enterprise may lead to suspension of status.
- Based on the Income Tax Return and GST return of the enterprises, their status will be updated.
- Enterprises shall be communicated regarding the change in their status.
- In case of an increase in investment of plant and machinery or turnover, the enterprise shall be maintaining its preceding status for 1 year from the close of the registration year even if there is a change in the status of enterprise.
- If there is a reduction in investment made in plant and machinery or turnover, due to which the status of the enterprise would have been revised, the enterprise shall maintain its current status till the closure of the year. The new status would become effective from the 1st April of the succeeding financial year.
Grievance and Redressal:
- The CHAMPIONS control room shall be acting as a single facilitation window.
- The District Industries Centers in their districts will be a single facilitation window.
- Any person who was not able to file for Udyam Registration can reach for the facilitation center through the single window system, with an Adhaar enrollment slip, bank passbook, or Voter Identity card or passport.
- In case of discrepancies, the General Manager of the District Industries Center of the concerned district shall undertake verification of Udyam registration of the enterprise. After that, the matter shall be forwarded to Director/Commissioner/Industry Secretary after giving an opportunity of being heard and then based on the findings shall give a recommendation to the Ministry of MSME, Government of India for cancellation of registration.
- The changes made in the definition would help the enterprises in the MSME sector to grow, as due to an increase in the investment limit and adding of turnover criteria would boost to sector to carry out the expansion. As the benefits of MSME laws will still apply to them.
- The registration of MSME would be valid for the enterprise until they are running the business, so there will not be any rush for the re-registration of the enterprise.
- The new portal collects the information from the ITR's and the GST returns, thereby avoiding the chances of the wrong classification of the enterprises.
- A single Facilitation window would reduce the documents burden as they need to be submitted once, easy location of documents for the inquiry purpose.
- There is an exemption provided by the Government of India, in the payment of Stamp Duty on land which is one of the beneficial points for the MSMEs as infrastructure is one of the important criteria for the establishment of enterprises.
- A 59 minutes loan portal has been enabled for MSME for easy access for credit facilities. The portal link is available on the GST site.
- Besides that, there is a provision for interest subvention and in the case of Exporter 5% rebate if the loan has been availed between the pre-shipment and post-shipment period.
- Government assistance in various forms are being provided to MSMEs such as Central Public Sector Undertakings will compulsorily procure 25% of their goods and services, Cluster of MSMEs Pharmacy to be formed and supported with 70% Government assistance.
- The GeM portal helps in online delivery of goods and services to the Government of India, which has served as a useful platform for the MSME’s since 2016. In less than 2 years GeM portal has created a vast market for MSME’s. The portal has created a job opportunity for many people. Almost 26% of the sellers are on the portal are the registered MSMEs. Its compulsory for the Government to procure 20% of the goods from the GeM portal.
- A micro credit scheme PM Street Vendor’s Atmanirbhar Nidhi for street vendor, through which they can access loan of Rs. 10000.00 for 1 year under the scheme.
- If any MSME wants to get its trademark or patent registered, a subsidy of 50% is being provided to them.
- Various Government tenders are opened for MSME where the enterprise can participate as past experience condition is relaxed for them.
- MSMEs can avail Industrial Promotion Subsidy and Subsidy on credit rating and NSIC( National Small Industries Corporations Ltd.) performance basis.
My Views Against:
- MSME’s lack the huge capital, despite loan advantages provided to them.
- MSMEs can be established anywhere in India, however local restrictions by the states create a challenge for them, as their compliance is a must to ensure the law benefits.
- The lack of technology in the digitalized era is a challenge for MSMEs as there is a shortage of skilled people, they generally lack behind.
- There is at times no proper compliance of laws, regulations, budget, etc as the staff is limited and they are entrusted with many tasks so it becomes difficult for them to handle everything.
- A proper centralized repository of law could be maintained so that it becomes easy for the Enterprises, to carry out their operations in an efficient manner.
- They could be provided timely training of the laborer for the usage of technology so that the work could be performed with full advancement.
- A presentation session annually for the knowledge of labour law can be made so that the workers are also aware of their working rights.
- An intensive campaign and an extensive marketing strategy, promotion will boost the market for the MSMEs.
- MSMEs contributes 40% of the Indian export which is almost 30% of the Indian GDP and creating 11 Crore jobs in the Indian market, i.e. the production capacity is huge so by providing them with the proper storage capacity will boost the sector.
- The Government can obtain the analysis of the sectors contributing maximum in the sector and accordingly can plan out the strategy contributing towards their growth.
- The power consumption can be moved towards solar energy, which already some industries are using, just like the establishment of Rewa solar power plant in Madhya Pradesh other plants can also be set up to increase the power.
- Considering high tension conditions with China is boon in disguise, MSMEs should develop their efficiencies to not only fulfill domestic demand but also compete internationally.