MICRO, SMALL AND

MEDIUM
ENTERPRISES- A
STUDY

By CA Manoj Gupta
gm2104@gmail.com
9828510543

CA Manoj Gupta, Jodhpur, 9828510543, gm2104 03/31/2024 1

DATE EFFECTIVE FROM AND
OBJECTIVE
 To provide for facilitating the promotion and
development and enhancing the
competitiveness of micro, small and medium
enterprises and for matters connected
therewith or incidental thereto.

 .This Act came into force on 2-10-2006.

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 2

 ENTERPRISE [SECTION 2(E)]
 “Enterprise” means an industrial undertaking
or a business concern or any other
establishment, by whatever name called,
engaged in the manufacture or production of
goods, in any manner, pertaining to any
industry specified in the First Schedule to the
Industries (Development and Regulation) Act,
1951 or engaged in providing or rendering of
any service or services.

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 3

NEW DEVELOPMENTS
 Method to determine value of plant and
machinery or equipment specified.
 All existing Udyog Aadhaar to Re-Register
from 1-7-2020 but upto 30.06.2022
 Udyam Registration will be granted instead
of Udyog Aadhaar
 Turnover and Investment Linked to ITR and
GST Records

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 4

CLASSIFICATION [SECTION 7]
 The Central Government is empowered to
classify any class or classes of enterprises,
whether proprietorship, Hindu undivided
family, association of persons, co-operative
society, partnership firm, company or
undertaking or any other legal entity as
micro, small or medium enterprise.
 This section overrides section 11B of the
Industries (Development and Regulation) Act,
1951.

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 5

MANUFACTURING ENTERPRISE
[CONDITIONS]
Classification As Conditions As to Does Enterprise Need To
Investment In Satisfy Conditions of
Plant And Section 29B of Industrial
Machinery Development Act
Micro Enterprise Discussed Later Yes

Small Enterprise Discussed Later Yes

Medium Enterprise Discussed Later No

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 6

CLASSIFICATION –
MANUFACTURING ENTERPRISE
 Above enterprises to be engaged in the
manufacture or production of goods
pertaining to any industry specified in the
First Schedule to the Industries
(Development and Regulation) Act, 1951. The
Government has specified that enterprise
employing plant and machinery in the
process of value addition to the final product
having a distinct name or character or use
may also be classified as above.

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 7

NEW CLASSIFICATION FROM 1-
7-2020
 New classification based on investment and
turnover criteria.
 Manufacturing and service merged
Micro Investment in plant and machinery or equipment < Rs.
1 crore and
Turnover < Rs. 5 crore
Small Investment in plant and machinery or equipment < Rs. 10
crore and
Turnover < Rs. 50 crore

Mediu Investment plant and machinery or equipment < Rs. 50

m crore and
Turnover < Rs. 250 crore

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 8

NEW CLASSIFICATION FROM 1-
7-2020
o Now both conditions are to be satisfied for
falling in any one category.
 Both investment and turnover test will
have to be satisfied.
 New criteria effective from 1-7-2020 as per
notification dated 26-6-2020.
 If any enterprise breaches any of the criteria
[Either investment or Turnover] then it will
be upgraded to next level but will not be
demoted untill both criteria are breached.

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 9

WHAT IF CATEGORY OF
ENTERPRISE CHANGES
 Based on the information furnished or gathered from Government’s sources
including ITR or GST return, the classification of the enterprise will be
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 will be 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 shall continue to avail of all nontax benefits of the category
(micro or small or medium) it was in before the re-classification, for a
period of three years from the date of such upward change.
 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.

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 10

AGGREGATION OF TURNOVER
AND INVESTMENT
 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.
If on a single PAN more than one unit is
registered then all units will be aggregated for
arriving at investment and turnover.
 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.
CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 11
VALUE OF PLANT AND
MACHINERY
 Costs That Shall Be Excluded
 Cost of Research and development
equipment , Pollution control equipment
and Industrial Safety Devices Shall be
Excluded
 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[ Which
previous year not specified].

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 12

VALUE OF PLANT AND
MACHINERY
 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. [False declaration to bring penalty]
 Plant and machinery or equipment of the enterprise, will derive its
meaning from Income Tax Rules, 1962 [But expression plant is defined in
the IT Act] and will 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, 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.
 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.

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 13

DETERMINATION OF TURNOVER
 Export of goods or services or both shall be excluded
from turnover.
 Turnover and Export Turnover to be derived from IT
Records or GST records.
 The exemption from the requirement of having GSTIN
shall be as per the provisions of the Central Goods
and Services Tax Act, 2017
 In case of any proprietorship enterprise not
registered under any Act or rules of the Central
Government or the State Government, the proprietor
may use his or her PAN for registration of the
enterprise in the Udyam Registration portal and for
all other types of enterprises PAN shall be mandatory.

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 14

HOW TO REGISTER [NEW
ENTERPRISES]
 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 [ No
requirement to upload any documents,
papers, certificates or proof] .
 A permanent “Udyam Registration Number”
Earlier Udyog Aadhaar will discontinue.
 An e-certificate, namely, “Udyam
Registration Certificate” shall be issued on
completion of the registration process.

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 15

REGISTRATION PROCESS
[EXISTING UNITS]
 All existing registered enterprises shall
register again on the Udyam Registration
portal on or after 1-7- 2020.
 All enterprises registered till 30th June, 2020,
shall be re-classified in accordance with this
notification.
 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.

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 16

DUTY OF MEDIUM ENTERPRISE
 A medium enterprise engaged in the
manufacture or production of goods
pertaining to any industry specified in the
First Schedule to the Industries
(Development and Regulation) Act, 1951 has
to file Memorandum [Udyam Registration]
with specified authority.
 Micro or Small Enterprise can file this
memorandum [Udyam Registration] at its
option.
 It is always beneficial to file the
Memorandum [Udyam Registration].
CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 17
TIME LIMIT FOR PAYMENT
 If one is buyer of goods or services from a
supplier then payment must be made within
time limits as specified under.
 “Buyer” means whoever buys any goods or
receives any services from a supplier for
consideration.
 “Goods” means every kind of movable
property other than actionable claims and
money. Immovable property is out of scope
of this Act.

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 18

TCS
Situation
ON
Where agreement
OVERSEAS
Time Limit
On or before the
TOUR Remarks

PACAKAGE
exists as to date of
payment
agreed date. Agreed
date cannot exceed a
period of 45 days from
day of acceptance or
the day of deemed
acceptance.

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 19

TCS
Situation
ON
Where there is no
OVERSEAS
Time Limit
TOUR Remarks
Before Appointed Day ‘Appointed day’
PACAKAGE
agreement means day following
immediately after the
expiry of the period
of fifteen days from
the day of
acceptance or the
day of deemed
acceptance of any
goods or any services
by a buyer from a
supplier.

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 20

DAY OF ACCEPTANCE
Day of Day of Acceptance Day of Deemed
Acceptanc (Where Objection Acceptance
e (Where Raised in Writing By
No Buyer)
Objection
Raised)
Day of the Day of removal of Day of the actual
actual objection, where such delivery of goods or
delivery of removal is made the rendering of
goods or within fifteen days services, where no
the from the day of the objection is raised
rendering delivery of goods or within fifteen days
of services. the rendering of from the day of the
Objection services delivery of goods or
to be the rendering of
raised in services
writing.

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 21

WHO IS SUPPLIER
 “Supplier” means a micro or small enterprise,
which has filed a memorandum [Udyam
Registration] with the authority . Filing of
Memorandum with specified authority is a
must to get advantage of MSME Act.
 Supplier includes any company, co-operative
society, trust or a body, by whatever name
called, registered or constituted under any
law for the time being in force and engaged in
selling goods produced by micro or small
enterprises and rendering services which are
provided by such enterprises
CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 22
FAILURE CONSEQUENCES
 If buyer fails to pay amount due to supplier within
time limit as above then interest payable by buyer.
 Interest to be paid at 3 times the bank rate
specified by RBI.
 Interest payable for period from appointed day or,
from the date immediately following the date
agreed upon on compounding basis.
 This interest payment is compulsory even if
agreement to contrary exist among parties.
 For any goods supplied or services rendered by the
supplier, the buyer shall be liable to pay the amount
with interest thereon.
 Interest payable not deductible under IT Act, 1961.
CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 23
DUTY OF BUYER –DISCLOSURE
IN AUDITED ACCOUNTS
 Following shall be disclosed in the accounts
 the principal amount and the interest due thereon (to be shown
separately) remaining unpaid to any supplier as at the end of each
accounting year;
 the amount of interest paid by the buyer in terms of section 16, along
with the amount of the payment made to the supplier beyond the
appointed day during each accounting year;
 the amount of interest due and payable for the period of delay in
making payment (which have been paid but beyond the appointed
day during the year) but without adding the interest specified under
MSME Act;
 the amount of interest accrued and remaining unpaid at the end of
each accounting year; and
 the amount of further interest remaining due and payable even in the
succeeding years, until such date when the interest dues as above are
actually paid to the small enterprise, for the purpose of disallowance
as a deductible expenditure under section 23.
 Penalty leviable for failure to disclose
CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 24
DUTY OF COMPANY BEING A
BUYER
 Any Company being buyer of goods or supply
of services from micro and small enterprise
whose payments to micro and small
enterprise exceed forty five days from the
date of acceptance or the date of deemed
acceptance of the goods. or services, shall
submit a half yearly return to the Ministry of
Corporate Affairs stating the following: (a)
The amount of payments due; and (b) The
reasons of the delay.

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 25

DUTY OF ENTERPRISE
 To File Udyam Registration. Only one Udyam Registration
will be allowed to be filed by one Enterprise.
 Any number of activities including manufacturing or service
or both may be specified in the Udyam Registration.
 The Udyam Registration shall be filed on self certification
basis and no additional document is required to be
uploaded at the time of such filing
 An enterprise having Udyam Registration Number shall
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.
CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 26
DUTY OF ENTERPRISE-
AADHAAR LINKAGE
Nature of Enterprise Whose Aadhaar Number Be Provided

Proprietorship Firm Proprietor

Partnership Firm Managing Partner

HUF Karta

A company or a limited Permanent Account Number(PAN) of the

liability partnership or a organisation along with Aadhaar number
co-operative society or a of the authorised signatory. GSTIN of
society or a trust entity shall also be provided.

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 27

CAN TRADING FIRM BE
REGISTERED AS MSME
 Prior to 2-7-2021 Wholesale and Retail Trade
were not allowed to Register as MSME. NIC
Code relating to Trading Activity (Code
Number 45 to 47) were not allowed in
Aadhaar Memorandum.
 From 2-7-2021 these activities are now
allowed and NIC Code relating to Trading
Activity (Code Number 45 to 47) are now
allowed in Aadhaar Memorandum but for
limited purposes.

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 28

ACTIVITIES NOT ALLOWED TO
BE REGISTERED
NIC Code Activity Remarks
02 Forestry and Logging
03 Fishing and
Aquaculture
45 to 47 Wholesale and Retail Now allowed from
Trade 02.07.2021. Further,
maintenance and
repair of motor
vehicles is also
allowed. [Code 45200
and 45403]
97 Activities of
households as
employees for
domestic personnel
98 Undifferentiated goods
and services03/31/2024
CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com producing 29
ACTIVITIES NOT ALLOWED TO
BE REGISTERED
NIC Code Activity Remarks
99 Activities of
extraterritorial
organization and
bodies
01 crop, animal Except code
production, hunting 01462,01463,01492,01
and related activities 493,01612,01620,0163
1 to 01633, 01639 and
01640
092 Gambling and Betting
Activities

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 30

EXTENSION OF VALIDITY
 The existing enterprises registered prior to
30''' June, 2020, shall continue to be valid
only for a period up to the 30 day of june ,
2022

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 31

REGULATORY MECHANISM
 The District Industries Centres (DICs) will also act as
Single Window facilitation Systems in their Districts.
 In case of any discrepancy or complaint, the General
Manager of the District Industries Centre of the
concerned District shall undertake an enquiry for
verification of the details of Udyam Registration
submitted by the enterprise and thereafter forward the
matter with necessary remarks to the Director or
Commissioner or Industry Secretary concerned of the
State Government who after issuing a notice to the
enterprise and after giving an opportunity to present its
case and based on the findings, may amend the details
or recommend to the Ministry of Micro, Small or Medium
Enterprises, Government of India, for cancellation of
the Udyam Registration Certificate.
CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 32
PENAL CONSEQUENCES
 If wrong information is filed in Udyam
Registration then Penalty leviable as under:
 First Conviction: Upto Rs. 1000
 Second or subseuquent conviction: Not Less
Than Rs. 1000 but Upto Rs. 10000
 If Buyer fails to disclose information in
financial statements : Penalty of Rs. 10000
leviable.

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 33

RECOVERY OF AMOUNT DUE
 Supplier may initiate recovery proceedings
from buyer by making reference to MSME
Council
 Reference to be decided within 90 days
 MSME Council may use suitable procedure to
resolve dispute
 Once MSME council decides the reference no
court can grant any relief till the buyer
deposits 75% of the amount determined by
MSME Council.

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 34

CA MANOJ GUPTA

Thank You
 CA. Manoj Gupta, Jodhpur.
 gm2104@gmail.com
 9828510543
 For private circulation only

CA Manoj Gupta, Jodhpur, 9828510543, gm2104@gmail.com 03/31/2024 35