INVESTMENT AND TURNOVER CALCULATION CRITERIA FOR MSMEs NOTIFIED
Ministry of Micro, Small, and Medium Enterprises on 26th June 2020 has officially notified the criteria for calculation of Investment and Turnover for MSMEs. The notification outlines the new classification of MSME that was introduced on 1st June 2020, which is as per the table below along with a detailed plan of registration and other requirements.
Registration as an MSME:
- New registrations:
- The notification clarifies that in order to establish an MSME, Udyam Registration has to be filed online on the Udyam Registration Portal, based on self-declaration with no documentary requirements. No fee shall be applicable for registration.
- Aadhar number shall be required for registration:
- of the proprietor in case of Proprietorship
- of the managing partner in case of Partnership Firm
- of the karta in case of an HUF
- For any other registered organisation like Company, LLP, Co-operative Society or Trust – GSTIN and PAN shall also be required along with the Aadhar Number
- Upon registration, the enterprise will be allotted an ‘Udyam Registration Number’.
- An e-certificate – ‘Udyam Registration Certificate’ shall be allotted to the enterprise on completion of the registration process.
- No enterprise shall file more than 1 (one) Udyam Registration, whether having one or more than one business activity i.e. complete disclosure of all the business activities to be specified in a single Udyam Registration.
- Registration of existing enterprises:
- All existing enterprises registered under EM–Part-II or UAM shall register again on the Udyam Registration portal on or after the 1st July 2020.
- All enterprises registered till 30th June 2020, shall be re-classified in accordance with this notification.
- The existing enterprises registered prior to 30th June 2020, shall continue to be valid only for a period up to the 31st March 2021.
- An enterprise registered with any other organisation under the Ministry of Micro, Small and Medium Enterprises shall register itself under Udyam Registration.
Composite criteria of investment and turnover for classification:
- The notification has clarified that a composite criterion of investment and turnover shall apply for classification of an enterprise as micro, small or medium i.e. 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. 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 GSTIN listed against the same 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 ITR of the previous years 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 GST, on self-disclosure basis, if the enterprise is a new one without any ITR.
- 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:
- Exports of goods or services or both, shall be excluded while calculating the turnover of any enterprise.
- 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 and the GSTIN.
- 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.
Points to Note:
- Enterprises having Udyam Registration Number shall have to update its information online on Udyam Registration portal along with its ITR and GST Returns and other required details.
- Failure to update such information poses a threat of suspension of the enterprise status.
- Based on the submission of documents, the enterprise classification shall be updated.
- Any graduation or reverse graduation shall be communicated to the enterprise.
- Facilitation and Grievance Redressal measures have been outlined in the notification, refer link.