The Indian government has taken a variety of initiatives to mitigate the effects of the pandemic, with a particular focus on small businesses. When mobility restrictions and social distance standards are imposed, micro, small, and medium enterprises (MSME) are seen as playing a critical role in promoting economic momentum. To improve post-Covid economic prospects, it is vital to focus on the expansion and development of the MSME sector.
Also, Read- udyam registration
MSME is defined under Section 7 of the Micro, Small, and Medium Enterprises Development Act of 2006 (the “Act”). The Ministry of Micro, Small, and Medium Enterprises revised the definition of MSME by notification on June 1, 2020, based on the finance minister’s recommendation, to extend the scope and so encompass a broader spectrum of firms. According to the new criteria, the category is based on the entity’s investment and turnover.
The Registration Process is as follows:
- The aforementioned definition eliminates the previously existing distinction between manufacturing and service enterprises in terms of investment limits. As a result, a wide spectrum of service providers should be included, as they tend to invest less in plant and machinery or instruments and have lower turnover than manufacturing firms with comparable earnings.
- The Ministry of Micro, Small, and Medium Enterprises has published a Notification dated June 26, 2020, establishing a whole new process for MSME registration (known as “Udyam Registration”), as the changes in classification will take effect on July 1, 2020.
- The aforementioned notice details the MSME registration process, which will begin on July 1, 2020. Current MSMEs will be required to register with Udyam as well.
- As a result of the modification in the definition of MSME and the addition of a mechanism for filing the memorandum under the Udyam Registration, it appears that MSME registration will be a requirement and, as a result, will be deemed a prerequisite for benefiting from the Ministry’s different schemes.
Registration on the basis of self-declaration:
Udyam Registration is usually done with the goal of making a self-declaration, as seen by the demand for Udyam Registration. An excerpt from the relevant notification is as follows:
Following an examination of the Udyam Registration portal’s registration process, it was discovered that the list of principal activities includes a section for commercial operations, land transportation, and an associate degree option for “Others.” As a result, trading, transportation, and other related operations will be classified as service enterprise activities and will be required to register as an MSME on the Udyam Registration.
Non-Availability of Aadhar:
If a person does not have an Aadhar number, they can go to MSME-Development Institutes or District Industries Centres (Single Window Systems) with their Aadhaar enrolment identity slip, copy of Aadhaar enrolment request, bank photo passbook, voter identity card, passport, or driving licence, and the Single Window Systems will help them get one.
Investment in plant, machinery, and equipment, as well as annual turnover, are calculated:
The amount of investment in plant, machinery, and equipment, as well as annual turnover, must be calculated to determine if the firm falls within the MSME’s constraints and in which category.
Plants, machinery, and equipment include the following types of plants, machinery, and equipment:
The Income Tax Rules of 1962 exclude land, buildings, and articles of furniture and fittings from the definition of plant, machinery, and equipment. Furthermore, the articles listed in Section 7(1) of the MSME Act 2006, paragraph 1 are excluded.
All units with the same Product and Services Tax Identification Number (GSTIN) registered against the same Permanent Account Number (PAN) will be evaluated as a single enterprise, with only the aggregated values used to decide whether the entity is categorized as micro, small, or medium.
The investment in plant and machinery or equipment is calculated using the preceding year’s income tax returns (ITR). In the case of a replacement business with no prior ITR, the investment is based on the promoter’s self-declaration, which will expire on March 31st of the financial year in which it files its first ITR.
If the newest business does not have an ITR and the computation is done on a self-declaration basis, the purchase (invoice) value of a plant, machinery, or equipment, whether bought first hand or second hand, shall be taken into account, excluding goods and services tax (GST).
Turnover:
Turnover will be calculated on a collective basis for all units with the same Goods and Services Tax Identification Number (GSTIN) listed against the same Permanent Account Number (PAN), and each of these units will be treated as a single enterprise, with turnover figures for all of these entities being viewed together and only the aggregate values being viewed, similar to how investment will be calculated.
It should also be noted that exports of goods or services, or both, are not included, although calculating a company’s turnover is difficult.
The GSTIN must be linked to information about an enterprise’s turnover and exports turnover under the income tax laws or the Central Goods and Services Act. Until December 31, 2021, the number of enterprises without a PAN will be determined on a self-declaration basis, after which a PAN and GSTIN will be required.
Existing MSMEs can apply for registration:
MSMEs will be able to register until December 2021. Before the expiration of their Udyog Aadhaar or EM-II registration, they must register on the Udyam Registration portal.
