MSME Clarification on New Udyam Registration

The Ministry of Micro, Small & Medium Enterprises issued an Office Memorandum in respect of Clarification on existing Entrepreneurs Memorandum (EM) Part-II/ Udyog Aadhaar Memorandum (UAM)/ New Udyam Registration. The revised procedure and criteria for the classification of enterprises as Micro, Small & Medium Enterprises and their registration in the Udyam Portal were announced vide Notification No. S.O. 2119(E) dated 26.06.2020. After the procedure was announced there were several representations for seeking clarifications on certain issues. The present article briefs the Procedure MSME Clarification on EM Part-II, UAM, and New Udyam Registration.

Procedure and criteria for MSME Classification and Udyam Registration - Notification No. S.O. (E) dated 26.06.2020

As per this notification2119, the ministry has classified the entity as Micro, Small, and Medium based on the investment in plant and machinery or equipment, and any person who intends to establish an MSME needs to file Udyam Registration online in the Udyam Registration portal. The notification also deals with the following procedures:

Composite criteria of investment and turnover for classification
Calculation of investment in plant and machinery or equipment
Calculation of turnover
Udyam MSME Registration process
Registration of existing enterprises
Updating of information and transition period in Udyam Portal
Facilitation and grievance redressal of enterprises

Know more about the Procedure and criteria for MSME Classification and Udyam Registration

Note on EM-II, UAM, and New Udyam Registration

Understand the following terms before knowing about the MSME Clarification on New Udyam Registration

Entrepreneurs Memorandum (EM) Part-II

Subsequent to be implementation of the Micro, Small and Medium Enterprises Development Act, 2006 with effect from October 2006 filing of Entrepreneurs Memorandum Part-I and Part-II came into vogue. The Entrepreneurs Memorandum (EM-II) should be filed within six months from the date of commercial production. EM-II enables the entrepreneurs to avail of the benefit of various incentives under the Central and State Governments.

Udyog Aadhaar Memorandum (UAM)

UAM is a one-page MSME registration form that constitutes a self-declaration format under which the MSME will self-certify its existence, details of bank account, promoter/owner’s Aadhaar details, and other minimum information. UAM registration has replaced Entrepreneurship Memorandum-If (EM-II) and Small Scale Industry Registration for all purposes.

New Udyam Registration

Any entrepreneur who intends to establish an MSME will have to file Udyam Registration online in the Udyam Registration Portal, on registration, an enterprise (Udyam) will be assigned with a Udyam Registration Number and Udyam Registration Certificate. Udyam Registration has replaced Udyog Aadhaar Memorandum (UAM) for MSME registration.

The validity of EM Part II and UAMs

As mentioned above, there were several representations regarding the validity of existing EM Part II and UAMs of the MSMEs, to address such issues, The Ministry of Micro, Small Medium Enterprises has clarified that at present EM Part II and UAMs are valid. As per the previous notification Ministry announced that “The existing enterprises registered before 30 June 2020, shall continue to be valid only for a period up to the 31^st March 2021”. Therefore, it is clarified and emphasized that all the existing Entrepreneurs Memorandum (EM) Part-II and Udyog Aadhaar Memorandum (UAM) obtained until 30.06.2020 will remain valid till 31.03.2021.

Updating the existing registration detail in UAM Portal

The Ministry of MSME also clarified that existing UAM holders can edit or amend the details on the UAM portal till 31.3.2021. Those firms that have not entered the Aadhaar or PAN number so far in the UAM portal are hereby advised to obtain the" Udyam Registration Number" well before 31.3.2021. Get in touch with IndiaFilings to get the Udyam Registration Number for MSMEs

Important Announcement for Entrepreneurs

As mentioned above, the existing registrations as EM Part II and UAMs will not remain valid after 31st March 2021 and it is strongly recommended that the entrepreneur need to file fresh registration in the new Udyam Registration Portal. According to the Ministry’s previous Notification No. S.O. 2119 (E) dated 26.6.2020 announced that "All enterprises registered till 31st June 2020, will be re-classified under this notification". To make the re-classification proper and realistic, it is necessary to enter the latest details. Note: The entrepreneur should file new registration in the Udyam Registration Portal. Therefore, all enterprises with EM Part II and/or UAMs are advised to register themselves on the Udyam Registration well before 31.03.2021 in the Udyam Registration.

Value of Plant and Machinery or Equipment

There were several representations from the entrepreneur regarding the valuation of plant and machinery or equipment on cost or purchase price while filing the Udyam Registration, considering the issue MSME notified the procedure. "The expression plant and machinery or equipment of the enterprise will 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 the expression plant and machinery also include all tangible assets (other than land and building, furniture and fittings): That online Form for Udyam Registration captures depreciated cost as of 31st March each year of the relevant previous year. Therefore, the value of Plant and Machinery or Equipment for all purposes of Notification No. S.O. 2119(E) dated 26.6.2020 and for all the enterprises shall mean the Written Down Value (WDV) at the end of the Financial Year as defined in the Income Tax Act and not the cost of acquisition or original price, which was applicable in the context of the earlier classification criteria.