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New criteria for classification of Micro,
Small and Medium Enterprises
PROVISIONS AT A GLANCE
CA J L Gupta
What is new provisions for MSME
Recent Notification No. S.O.
2119(E) dated 26.06.2020 issued
by Ministry of Micro., Small &
Medium Enterprises(MSME)
regarding criteria for classification
of enterprises as Micro, Small &
Medium Enterprises and their
registration in Udyam Portal
Table of Contents:-
1. Classification of Micro, Small and Medium Enterprises (MSMEs)
2. Manner of determination of Investment in Plant and Machinery or
Equipment
3. Manner of Computation of Annual Turnover
4. Revised MSME Registration procedure
5. Mandatory Fresh registration of existing Enterprises within prescribed
time limit
6. Reclassification on upward/downward change
New Classification of Micro, Small and Medium
Enterprises (MSMEs) (w.e.f 01-07-2020)
S. No. Nature of
Enterprise
Investment in Plant
& Machinery or
Equipment (in INR)
Annual
Turnover (in INR)
i. Micro Enterprise ≤ 1 crore ≤ 5 crore
ii. Small Enterprise ≤ 10 crore ≤ 50 crore
iii. Medium Enterprise ≤ 50 crore ≤ 250 crore
Manner of determination of Investment in
Plant and Machinery or Equipment
1. Investment in plant and machinery or equipment will be determined from
previously filed Income Tax Return (ITR) under the Income Tax Act,
1961.
2. In case of new enterprise where no ITR is available, value of
investment shall be taken based on self-declaration basis until the end
of the financial year in which ITR is filed. Further, investment shall
be excluding Goods and Services Tax (GST).
3. Value of Plant and machinery or equipment of the enterprise shall be
determined as per Income Tax Rules, 1962.
4. Written down value of the aforesaid tangible assets shall be considered
as mentioned in the latest ITR filing (i.e. 31st March).
Manner of Computation of Annual Turnover
1. Exports of goods or services or both, shall be
excluded while calculating turnover.
2. Turnover and exports turnover for an enterprise shall be
computed as per Income Tax Act or the Central Goods and
Services Act.
3. In case of new enterprise or if any enterprise does not have
PAN, turnover will be considered on self-declaration basis for
a period up to 31st March 2021 and thereafter PAN and
GSTIN shall be mandatory.
Registration of Existing Enterprises
1. All existing registered under EM-Part-II or UAM shall register
again on the Udyam Registration portal on or after 1 July,
2020.
2. All enterprises registered till 30 June 2020, shall be re-
classified in accordance with this notification.
3. The existing enterprises registered prior to 30 June 2020
shall continue to be valid only for a period upto the 31
March 2021
4. An enterprise registered with any other organization under the
Ministry of Micro, Small and Medium Enterprises shall register
itself under Udyam Registration.
Reclassification on upward/downward change
1. An enterprise having Udyam Registration Number shall
update its information as may be required, on self-declaration
basis. Classification of the enterprise may change accordingly.
2. In case of an upward change in terms of classification, an
enterprise will maintain its present status till expiry of one
year from the close of the year of registration.
3. In case of downward change the benefit of the changed
status only with effect from 1st April of the financial year
following the year in which such change took place.
Composite criteria of Investment and Turnover
for Classification-
1. A composite criterion of investment and turnover shall apply
for classification of an enterprise as micro, small or medium.
2. It is pertinent to mention that 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.
MSME  new criteria  from 01-07-2020

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MSME new criteria from 01-07-2020

  • 1. New criteria for classification of Micro, Small and Medium Enterprises PROVISIONS AT A GLANCE CA J L Gupta
  • 2. What is new provisions for MSME Recent Notification No. S.O. 2119(E) dated 26.06.2020 issued by Ministry of Micro., Small & Medium Enterprises(MSME) regarding criteria for classification of enterprises as Micro, Small & Medium Enterprises and their registration in Udyam Portal
  • 3. Table of Contents:- 1. Classification of Micro, Small and Medium Enterprises (MSMEs) 2. Manner of determination of Investment in Plant and Machinery or Equipment 3. Manner of Computation of Annual Turnover 4. Revised MSME Registration procedure 5. Mandatory Fresh registration of existing Enterprises within prescribed time limit 6. Reclassification on upward/downward change
  • 4. New Classification of Micro, Small and Medium Enterprises (MSMEs) (w.e.f 01-07-2020) S. No. Nature of Enterprise Investment in Plant & Machinery or Equipment (in INR) Annual Turnover (in INR) i. Micro Enterprise ≤ 1 crore ≤ 5 crore ii. Small Enterprise ≤ 10 crore ≤ 50 crore iii. Medium Enterprise ≤ 50 crore ≤ 250 crore
  • 5. Manner of determination of Investment in Plant and Machinery or Equipment 1. Investment in plant and machinery or equipment will be determined from previously filed Income Tax Return (ITR) under the Income Tax Act, 1961. 2. In case of new enterprise where no ITR is available, value of investment shall be taken based on self-declaration basis until the end of the financial year in which ITR is filed. Further, investment shall be excluding Goods and Services Tax (GST). 3. Value of Plant and machinery or equipment of the enterprise shall be determined as per Income Tax Rules, 1962. 4. Written down value of the aforesaid tangible assets shall be considered as mentioned in the latest ITR filing (i.e. 31st March).
  • 6. Manner of Computation of Annual Turnover 1. Exports of goods or services or both, shall be excluded while calculating turnover. 2. Turnover and exports turnover for an enterprise shall be computed as per Income Tax Act or the Central Goods and Services Act. 3. In case of new enterprise or if any enterprise does not have PAN, turnover will be considered on self-declaration basis for a period up to 31st March 2021 and thereafter PAN and GSTIN shall be mandatory.
  • 7. Registration of Existing Enterprises 1. All existing registered under EM-Part-II or UAM shall register again on the Udyam Registration portal on or after 1 July, 2020. 2. All enterprises registered till 30 June 2020, shall be re- classified in accordance with this notification. 3. The existing enterprises registered prior to 30 June 2020 shall continue to be valid only for a period upto the 31 March 2021 4. An enterprise registered with any other organization under the Ministry of Micro, Small and Medium Enterprises shall register itself under Udyam Registration.
  • 8. Reclassification on upward/downward change 1. An enterprise having Udyam Registration Number shall update its information as may be required, on self-declaration basis. Classification of the enterprise may change accordingly. 2. In case of an upward change in terms of classification, an enterprise will maintain its present status till expiry of one year from the close of the year of registration. 3. In case of downward change the benefit of the changed status only with effect from 1st April of the financial year following the year in which such change took place.
  • 9. Composite criteria of Investment and Turnover for Classification- 1. A composite criterion of investment and turnover shall apply for classification of an enterprise as micro, small or medium. 2. It is pertinent to mention that 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.