RBI to MSMEs: No need to re-register under Udyog Aadhaar for reclassification as per new definition

MSMEs had also sought clarity around the valuation of their plant and machinery or equipment to be based on cost or purchase price while registering.

Ease of Doing Business for MSMEs: The Reserve Bank of India has issued a circular with clarifications for MSMEs around the registration of existing units under Entrepreneurs Memorandum (EM) part II and Udyog Aadhaar Memorandum (UAM). The circular, which has been issued on the advice of the MSME Ministry, said that existing EMs part II and/or UAMs of MSMEs obtained before June 30, 2020, will continue to remain valid till March 31, 2021. According to the ministry, MSMEs had sought clarification whether their existing registrations would remain or valid or not following the government’s June 26, 2020 notification on the classification of MSMEs as per the new definition and specification of the form and procedure for registration with effect from July 1, 2020.

However, the circular sent by RBI last Friday also noted that such MSMEs, which are already registered under EM part II and UAM, are recommended to file new registration on the Udyam Registration portal before the existing registration expires. Also, since all registered MSMEs will be reclassified as per the new MSME definition, announced by the Finance Minister Nirmala Sitharaman in May this year based on turnover and investment, “it is necessary that the latest details are entered by the MSMEs,” a clarification earlier this month by the Office of the Development Commissioner had noted.

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MSMEs had also sought clarity around the valuation of their plant and machinery or equipment to be based on cost or purchase price while filing registering. The RBI circular, in response, clarified that the online form for registration captures the depreciated cost of the plant and machinery or equipment of the relevant previous year. Hence, the value for all purposes and for all enterprises would mean the Written Down Value at the end of the financial year as per the Income Tax act. It would not be based on the purchase price or original price which was applicable as per the earlier classification.

According to the new classification, units with investment in plant and machinery or equipment up to Rs 1 crore and turnover up to Rs 5 crore rupees would be known as micro-enterprises. Similarly, small enterprises would have an investment in plant and machinery or equipment up to Rs 10 crore and turnover not more than Rs 50 crore. Enterprises wherein investment does not exceed Rs 50 crore and turnover not beyond Rs 250 crore would be categorized as medium units.