Author- admin
Date:June 1, 2022
What is MSME
MSME is an abbreviation of Micro, Small and Medium Enterprises. In other words, these are the enterprises which are Micro, Small and Medium in nature.
The enterprises which are Micro, Small and Medium are presently determined by the amount of investment in plant, machinery or equipment and the annual turnover, as per notification No. S.O. 2119(E) dated 26.06.2020 / 26th June, 2020
‘NB Associates’ provides comprehensive MSME related legal consultancy
Our clients can contact us for MSME-related claims – Recovery of dues or other related legal consultancy
Micro enterprise literally means an enterprise operating on a very small scale.
Micro enterprise generally refers to a type of small business enterprise that has a very small number of employees, typically less than ten people, and very low levels of revenue or capital investment
Micro enterprise can take many forms, such as home-based businesses, street vendors, small-scale agricultural or manufacturing operations, and small service providers.
Notification No. S.O. 2119(E) dated 26.06.2020 / 26th June, 2020 classify Micro enterprises as enterprises where the investment in plant and machinery or equipment does not exceed one crore rupees and turnover does not exceed five crore rupees
A small enterprise is a type of business that is larger than a micro enterprise, but small than a medium – sized enterprise. Small enterprise typically have more employees and higher level of revenue or capital investment than micro enterprise, but less than medium – sized enterprises.
In general, small enterprise have fewer than 50 employees. Small enterprise can take many forms, including retail shops, restaurants, consulting firms etc.
Notification No. S.O. 2119(E) dated 26.06.2020 / 26th June, 2020 classify Micro enterprises as enterprises where the investment in plant and machinery or equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees.
A medium – sized enterprise is a type of business that is larger than a small enterprises but smaller than a large enterprise. These enterprise typically have more employees and higher levels of revenue or capital investment than small enterprise.
Generally medium sized enterprise have between 50 to 200 employees. Medium – sized enterprise can take many forms, including manufacturing firms, wholesalers, and professional service firms.
Notification No. S.O. 2119(E) dated 26.06.2020 / 26th June, 2020 classify Micro enterprises as enterprises where the investment in plant and machinery or equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees.
A composite criterion of investment and turnover applies for classification of an enterprise as micro, small or medium.
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.
However, no enterprise is 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 Goods and Services Tax Identification Number (GSTIN) listed against the same Permanent Account Number (PAN) is / are collectively treated as one enterprise and the turnover and investment figures for all of such entities be seen together and only the aggregate values is considered for deciding the category as micro, small or medium enterprise
The calculation of investment in plant and machinery or equipment is linked to the Income Tax Return (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 is 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, 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 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, is taken into account excluding Goods and Services Tax (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 MSMED Act is excluded from the calculation of the amount of investment in plant and machinery.
Exports of goods or services or both, is excluded while calculating the turnover of any enterprise whether micro, small or medium, for the purposes of classification.
Information as regards turnover and exports turnover for an enterprise to be linked to the Income Tax Act or the Central Goods and Services Act (CGST Act) and the GSTIN.
The turnover related figures of such enterprise which do not have PAN was considered on self-declaration basis for a period up to 31st March, 2021 and thereafter, PAN and GSTIN has been made mandatory.
‘NB Associates’ provides comprehensive MSME related legal consultancy
Our clients can contact us for MSME related claims – Recovery of dues or other related legal consultancy
The form for registration is provided in the Udyam Registration portal.
There is no fee for filing Udyam Registration.
Aadhaar number is required for Udyam Registration.
The Aadhaar number to be of the proprietor in the case of a proprietorship firm, of the managing partner in the case of a partnership firm and of a karta in the case of a Hindu Undivided Family (HUF).
In case of a Company or a Limited Liability Partnership or a Cooperative Society or a Society or a Trust, the organisation or its authorised signatory shall provide its GSTIN and PAN along with its Aadhaar number.
In case an enterprise is duly registered as an Udyam with PAN, any deficiency of information for previous years when it did not have PAN shall be filled up on self-declaration basis.
No enterprise to file more than one Udyam Registration. Any number of activities including manufacturing or service or both may be specified or added in one Udyam Registration.
Whoever intentionally misrepresents or attempts to suppress the self-declared facts and figures appearing in the Udyam Registration or updation process is liable to such penalty as specified under section 27 of the MSMED Act.
An enterprise having Udyam Registration Number can update its information online in the Udyam Registration portal, including the details of the ITR and the GST Return for the previous financial year and such other additional information as may be required, on self declaration basis.
Failure to update the relevant information within the period specified in the online Udyam Registration portal will render the enterprise liable for suspension of its status.
Based on the information furnished or gathered from Government’s sources including ITR or GST return, the classification of the enterprise is updated.
In case of graduation (from a lower to a higher category) or reverse-graduation (sliding down to lower category) of an enterprise, a communication is sent to the enterprise about the change in the status.
In case of an upward change in terms of investment in plant and machinery or equipment or turnover or both, and consequent re-classification, an enterprise to maintain its prevailing status till expiry of one year from the close of the year of registration.
In case of reverse-graduation of an enterprise, whether as a result of re-classification or due to actual changes in investment in plant and machinery or equipment or turnover or both, and whether the enterprise is registered under the Act or not, the enterprise to continue in its present category till the closure of the financial year and it will be given 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.
In order to facilitate the promotion and development and enhancing the competitiveness of micro, small and medium enterprises the through Act No. 27 of 2006 came up with Micro, Small and Medium Enterprises Development Act, 2006 (the ‘Act’)
As per section 8 of the Act Any person who intends to establish a micro, small or medium enterprise is to file a memorandum for such micro, small or medium enterprises with such authority as is prescribed.
In other words, such a person needs to register as MSME.
MSME Act of 2006 was passed for promotion and development and to enhance the competitiveness of micro, small and medium enterprises.
Govt of India has recognised the contributions of MSME in India’s economic sector. Indian Government’s recognition has given thrust to the development and promotion of MSMEs.
From time to time Indian Govt. or State Govt. has come up with several benefits.
Read here: Benefits of MSME registration
Section 15, 16, 17, 18, and 19 of the Act relates to liability of the buyer to make payment, provisions related to the adjudication of dispute between buyer and supplier.
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Please note
This Article is written by Managing Partner Naveen Bhardwaj with assistance and research from the NB Associates team.
The content(s) of this Article cannot be copied or reproduced without the express written consent of NB Associates.
‘NB Associates’ provides comprehensive MSME related legal consultancy
Our clients can contact us for MSME-related claims – Recovery of dues or other related legal consultancy
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