According to a statement published by the Ministry of Micro, Small and Medium Enterprises on June 26th 2020, a micro, the small and medium enterprise will now be recognised as Udyam. The ministry has also developed specific criteria for classifying micro, small, and medium firms, as well as the registration method and the ministry’s accommodations to make the process easier. Exports of goods or services, or both, are to be omitted when calculating the turnover of any business, whether micro, small, or medium, according to the notification. According to the document, the registration process will be known as Udyam Registration. Micro, small, and compact Udyam Registration can now be submitted online based on self-declaration without the need to upload documents, papers, certifications, or proof, according to the Ministry of Enterprises. An Aadhaar number is all that is required to register a business. From July 1st, 2020, the new online registration will be available.
An enterprise is classified as a micro, small, or medium enterprise based on the following criteria:
a micro-enterprise with a plant and machinery or equipment investment of less than one crore rupees and a turnover of less than five crore rupees;
A small business is one in which the investment in plant and machinery or equipment does not exceed ten crore rupees and the turnover does not exceed fifty crore rupees, a medium-firm is one with an investment in plant and machinery or equipment of not more than fifty crore rupees and a turnover of not more than 250 crore rupees.
Creating a micro, small, or midsize business
Anyone who wants to start a micro, small, or medium business can fill out a self-declaration form on the Udyam Registration portal without having to upload any paperwork, papers, certifications, or proof.
A permanent identification number will be provided to an enterprise (referred to as – Udyam in the Udyam Registration portal) upon registration.
Investment and turnover combined as a categorization criterion –
For the classification of an enterprise as micro, small, or medium, a composite criterion of investment and turnover will be used.
If an enterprise exceeds the ceiling limits specified for its current category in either the investment or turnover criteria, it will cease to exist in that category and be placed in the next higher category; however, no enterprise will be placed in unless it falls below the investment and turnover ceiling restrictions stated for its current category, it will be placed in the lower category.
All units with the same GSTIN (Goods and Services Tax Identification Number) are listed under the same Permacode.The turnover and investment statistics for all of these entities will be viewed together, and only the aggregate values will be used to determine whether the entity is classified as a micro, small, or medium enterprise.
Calculation of plant and machinery or equipment investment –
1. Investment in plant and machinery or equipment shall be calculated using the previous year’s Income Tax Return (ITR) filed under the Income Tax Act of 1961.
2. In the event of a new business with no past ITR, the investment will be based on the promoter’s self-declaration, and this relaxation will cease on March 31st of the following year.The fiscal year in which the company submits its first ITR.
3. The term “plant and machinery or equipment of the enterprise” has the same meaning as “plant and machinery” in the Income Tax Rules, 1962, which were enacted under the Income Tax Act, 1961, and includes all physical assets (other than land and building, furniture and fittings).
4. If the firm is a new one with no ITR, the purchase (invoice) value of a plant and machinery or equipment, whether obtained first hand or second hand, shall be taken into account on a self-disclosure basis, omitting Goods and Services Tax (GST).
5. The price of certain items listed in Explanation I to section 7’s subsection (1) the amount of investment in plant and machinery is not to be included in the calculation of the Act.
NIC code for Kirana business is a recommended read.
Turnover calculation –
Exports of goods or services, or both, shall be omitted from the calculation of any enterprise’s turnover for classification purposes, whether micro, small, or medium.
The Income Tax Act or the Central Goods and Services Act, as well as the Good Services Tax India, will be used to link information about an enterprise’s turnover and export turnover.
For the period up to March 31st 2021, the turnover related numbers of such firms that do not have a PAN will be assessed on a self-declaration basis, and thereafter, PAN will be required India’s Good Services Tax would be obligatory.