Tag Archives: MSME

emergency credit line

Emergency Credit Line Guarantee Scheme (ECLGS), a covid relief scheme to support the Micro, Small & Medium enterprises has been extended upto 31st March, 2022 with some small modifications as below:

  1. Existing borrowers under ECLGS 1.0 & 2.0 would be eligible for additional credit support of upto 10% of total credit outstanding as on 29.02.2020 or 31.03.2021, whichever is higher.
  2. Businesses who have not availed assistance under ECLGS (ECLGS 1.0 or 2.0),  can avail credit  support  of upto 30% of their credit outstanding as on 31.03.2021.
  3. Businesses in sectors specified under ECLGS 3.0, who have previously not availed ECLGS, can avail credit support up to 40% of their credit outstanding as on 31.03.2021, to the maximum of Rs.200 crore per borrower;
  4. Incremental credit can be availed within these limits by  existing ECLGS borrowers whose eligibility increased because of change in cut off date to 31.03.2021 from 29.02.2020.
  5. Accordingly, Borrowers who have availed assistance under ECLGS and whose credit outstanding as on 31.03.2021 (excluding support under ECLGS) is higher than that on 29.02.2020 shall be eligible for incremental support within the cap stipulated under ECLGS 1.0,2.0 or 3.0.

https://pib.gov.in/PressReleasePage.aspx?PRID=1759251

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traders in MSME

MSME ministry has vide its press release dated 2nd July, 2021 announced that retail and wholesale traders can now register themselves as MSME units in the MSME portal. Hitherto, they were kept out of the purview of the MSME sector.

https://pib.gov.in/PressReleasePage.aspx?PRID=1732193

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MSME regn validity extended

Ministry of Micro, Small & Medium Enterprises has extended the validity of the Udyog Aadhar Memorandum from 31/3/2021 to 31/12/2021. A notification has been issued to that effect.

Hitherto, all existing MSME registrants were required to migrate to the new portal by 31/03/2021 and all the old MSME registrations would have been rendered null and void. Now in view of the covid pandemic, the Ministry has decided to continue with the old registrations upto end December, 2021.

All existing MSME registrants under the old platform need to migrate to the new Udayam portal which is easy and simple and requires some few details of the applicant, besides the PAN of the unit and aadhar of the Director/ Partner/ Proprietor.

https://pib.gov.in/PressReleasePage.aspx?PRID=1727980

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MSME registration

Government has announced a simplication of the registration process for MSME units on its Udayam portal. Now only PAN (permanent account no. of tax) and Aadhar (obviously of one of the Director or Partner or of the Proprietor) is required.

Need to see whether this intent is actually translated into action on the website. Registration on the MSME portal is not a difficult task, yet it asks for certain basic details of the unit proposed to be registered, which in my view is quite fair.

https://pib.gov.in/PressReleasePage.aspx?PRID=1727325

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imports of goods at concessional rates

https://pib.gov.in/PressReleasePage.aspx?PRID=1719706

The Finance Minister had in her Budget Speech this year announced that the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 (IGCR, 2017) would be amended to boost trade facilitation. Accordingly, the Central Board of Customs and Indirect Taxes( CBIC) had immediately enhanced the scope of these rules on 2nd February 2021.

The CBIC has now issued a Circular No.10/2021-Customs, dated 17th May 2021 in order to assist the trade in understanding the improvements in the IGCR, 2017 so that they may make full use of the new facilities. Kindly click here to see the Circular

The IGCR, 2017 lay down the procedures and manner in which an importer can avail the benefit of a concessional Customs duty on import of goods required for domestic production of goods or providing services. One major change that accommodates the needs of trade and industry is that the imported goods have been permitted to be sent out for ‘job work’. The absence of this facility had earlier constrained the industry especially those in the MSME sector which did not have the complete manufacturing capability in-house.

Importantly, even importers who do not have any manufacturing facility can now avail the IGCR, 2017 to import goods at concessional Customs duty and get the final goods manufactured entirely on job work basis.However, some sectors such as gold, jewellery, precious stones and metals have been excluded.

Another major incentive now provided is to allow those who import capital goods at a concessional Customs duty to clear them in the domestic market on payment of duty and interest, at a depreciated value. This was not allowed earlier and manufacturers were stuck with the imported capital goods after having used them as they could not be easily re-exported.

Further, the procedure for availing the concessional Customs duty under these rules have been reviewed and rationalized. The required intimations and records can be sent by email to the jurisdictional Customs officer thereby obviating any physical interface.

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MSME – clarifications

RBI circular dated 21st August, 2020 giving some clarifications on the amended MSME definition.

Please refer to the circular FIDD.MSME & NFS.BC.No.3/06.02.31/2020-21 dated July 2, 2020 on ‘Credit flow to Micro, Small and Medium Enterprises Sector’.

2. In view of the representations from IBA and banks regarding applicability of certain aspects contained in the Gazette notification No. S.O. 2119(E) dated June 26, 2020 on new criteria for classifying the enterprises as micro, small and medium enterprises, the Ministry of MSME, vide their Office Memorandum (OM) No.2/1(5)/2019 – P & G/Policy (pt. IV) dated August 6, 2020 and letter F.No.5/2(2)/2020 – P & G/Policy dated August 13, 2020 has, inter alia, clarified the following:

2.1 Classification of Enterprises as per new definition

(i) Classification / re-classification of MSMEs is the statutory responsibility of the GoI, Ministry of MSME, as per the provisions of the MSMED Act, 2006.

(ii) As per para 2 of the said Gazette notification all enterprises are required to register online and obtain ‘Udyam Registration Certificate’. All lenders may, therefore, obtain ‘Udyam Registration Certificate ’from the entrepreneurs.

2.2 Validity of EM Part II and UAMs issued till June 30, 2020

(i) The existing Entrepreneurs Memorandum (EM) Part II and Udyog Aadhaar Memorandum (UAMs) of the MSMEs obtained till June 30, 2020 shall remain valid till March 31, 2021. Further, all enterprises registered till June 30, 2020, shall file new registration in the Udyam Registration Portal well before March 31, 2021.

(ii) ‘Udyam Registration Certificate’ issued on self-declaration basis for enterprises exempted from filing GSTR and / or ITR returns will be valid for the time being, upto March 31, 2021.

2.3 Value of Plant and Machinery or Equipment

The online form for Udyam Registration captures depreciated cost as on 31st March each year of the relevant previous year. Therefore, the value of Plant and Machinery or Equipment for all purposes of the Notification No. S.O. 2119(E) dated June 26, 2020 and for all the enterprises shall mean the Written Down Value (WDV) as at the end of the Financial Year as defined in the Income Tax Act and not cost of acquisition or original price, which was applicable in the context of the earlier classification criteria.

3. In view of the above, instructions contained in circular FIDD.MSME & NFS.BC.No.10/06.02.31/2017-18 dated July 13, 2017 on ‘Investment in plant and machinery for the purpose of classification as Micro, Small and Medium Enterprises – documents to be relied upon’ are superseded.

4. Further, other instructions contained in circular FIDD.MSME & NFS.BC.No.3/06.02.31/2020-21 dated July 2, 2020 remains the same.

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MSME – Udyam registration

All MSME units as per the new definition of MSME (including those who are already registered in the Udyog Aadhar portal) are required to register/ re-register in the Udyam Registration portal (https://udyogaadhaar.gov.in/)

The classification of MSME units are as follows:

(i) a micro enterprise, where the investment in plant and machinery or equipment does not exceed one crore rupees and turnover does not exceed five crore rupees;
(ii) a small enterprise, where the investment in plant and machinery or equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees; and
(iii) a medium enterprise, 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.

REGISTRATION PROCESS:

(1) Any person who intends to establish a micro, small or medium enterprise may file Udyam Registration online in the Udyam Registration portal, based on self-declaration with no requirement to upload documents, papers, certificates or proof.
(2) On registration, an enterprise (referred to as ―Udyam‖ in the Udyam Registration portal) will be assigned a permanent identity number to be known as ―Udyam Registration Number‖.
(3) An e-certificate, namely, ―Udyam Registration Certificate‖ shall be issued on completion of the registration process.

(4) Aadhaar number shall be required for Udyam Registration.
(5) The Aadhaar number shall 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).
(6) 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.
(7) 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.
(8) No enterprise shall file more than one Udyam Registration:
Provided that any number of activities including manufacturing or service or both may be specified or added in one Udyam Registration.

(9) All existing enterprises registered under EM–Part-II or UAM shall register again on the Udyam Registration portal on or after the 1
st day of July, 2020.
(10) All enterprises registered till 30th June, 2020, shall be re-classified in accordance with this notification.
(11) The existing enterprises registered prior to 30th June, 2020, shall continue to be valid only for a period up to the 31stday of March, 2021.
(12) An enterprise registered with any other organisation under the Ministry of Micro, Small and Medium Enterprises shall register itself under Udyam Registration.

Copy of MSME notification in this regard can be found here

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credit flow to MSMEs

RBI has vide its circular dated 2nd June, 2020 directed banks to follow the new definition passed by the Union Government vide their notification dated 26th June, 2020 for MSMEs (Micro, Small & Medium Enterprises) while considering credit facilities for them.

A micro enterprise is one where investment in plant & machinery and equipment does not exceed Rs.1 crore and turnover does not exceed Rs.5 crores. For small enterprises, the limits are Rs.10 crores and Rs.50 crores respectively and for medium enterprises, it is Rs.50 crores and Rs.250 crores respectively.

Banks will have to take composite definition i.e. both investment and turnover and where an enterprise crosses any one limit then it will be considered in the next higher category but for classifying units from higher category to the lower category, it should come under both limits i.e investment plus turnover.

Calculation of investment in plant & machinery will be linked to the Income Tax return of previous financial year.

Detailed guidelines are given below:

Credit flow to Micro, Small and Medium Enterprises Sector

Please refer to our circular RPCD.PLNFS.BC.No.63/06.02.31/2006-07 dated April 4, 2007 containing definition of Micro, Small and Medium Enterprises as per Section 7 (I) of the Micro Small and Medium Enterprises Development Act, 2006.

2. In this connection, we inform that Government of India (GoI), vide Gazette Notification S.O. 2119 (E) dated June 26, 2020, has notified new criteria for classifying the enterprises as Micro, Small and Medium enterprises. The new criteria will come into effect from July 1, 2020. The details are as under:

2.1 Classification of enterprises

An enterprise shall be classified as a Micro, Small or Medium enterprise on the basis of the following criteria, namely:

  1. a micro enterprise, where the investment in plant and machinery or equipment does not exceed one crore rupees and turnover does not exceed five crore rupees;
  2. a small enterprise, where the investment in plant and machinery or equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees; and
  3. a medium enterprise, 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

2.2 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. 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.
  3. All units with Goods and Services Tax Identification Number (GSTIN) listed against the same Permanent Account Number (PAN) shall be collectively treated as one enterprise and the turnover and investment figures for all of such entities shall be seen together and only the aggregate values will be considered for deciding the category as micro, small or medium enterprise.

2.3 Calculation of investment in plant and machinery or equipment

  1. The calculation of investment in plant and machinery or equipment will be linked to the Income Tax Return (ITR) of the previous years filed under the Income Tax Act, 1961.
  2. In case of a new enterprise, where no prior ITR is available, the investment will be 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.
  3. The expression ‘’plant and machinery or equipment’’ of the enterprise, shall 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 shall include all tangible assets (other than land and building, furniture and fittings).
  4. The purchase (invoice) value of a plant and machinery or equipment, whether purchased first hand or second hand, shall be taken into account excluding Goods and Services Tax (GST), on self-disclosure basis, if the enterprise is a new one without any ITR.
  5. The cost of certain items specified in the Explanation I to sub-section (1) of section 7 of the Act shall be excluded from the calculation of the amount of investment in plant and machinery.

2.4 Calculation of turnover

  1. Exports of goods or services or both, shall be excluded while calculating the turnover of any enterprise whether micro, small or medium, for the purposes of classification.
  2. Information as regards turnover and exports turnover for an enterprise shall be linked to the Income Tax Act or the Central Goods and Services Act (CGST Act) and the GSTIN.
  3. The turnover related figures of such enterprise which do not have PAN will be considered on self-declaration basis for a period up to 31st March, 2021 and thereafter, PAN and GSTIN shall be mandatory.

2.5 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 will 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 will 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. Other aspects relating to registration of enterprises, grievance redressal, etc. are mentioned in the Gazette Notification S.O. 2119 (E) dated June 26, 2020.

3. The above instructions supersedes our earlier guidelines dated April 4, 2007, except paragraph 6 relating to delayed payment to micro and small enterprises.

4. We advise you to initiate necessary action for reclassification of enterprises as per the new definition w.e.f July 1, 2020 and issue necessary instructions to your branches/controlling offices in this regard, at the earliest.

Copy of the RBI circular can be found here

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MSME new definition

Govt. under the Ministry of Micro, Small & Medium Enterprises has vide its notification dated 1st June, 2020 amended the criteria for classification of micro, small & medium enterprises in the country. This amendment will be effective from 1st July, 2020.

As per the new definition

(i) a micro enterprise, where the investment in Plant and Machinery or Equipment does not exceed one crore rupees and turnover does not exceed five crore rupees;

(ii) a small enterprise, where the investment in Plant and Machinery or Equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees;

(iii) a medium enterprise, 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.

So in each case, both the criteria has to be satisfied i.e. the investment and the turnover. Where for example a micro enterprise turnover exceeds Rs. 5 crore but its investment is still under Rs.1 crore it will still be considered as a micro enterprise until its investment also exceeds Rs.1 crore.

I guess the cutoff date for reckoning investment limits and turnover will be the financial year end and that too on the basis of audited financial results.

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