RBI: Clarifies New Definitions of Micro, Small and Medium Enterprises

The Reserve Bank of India (R.B.I.) on August 21, 2020, released a notification to clarify some issues for which IBA and bank’s representation approached regarding the 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.

This notification clarified about the Classification of Enterprises as per new definition–

1. “Classification / re-classification of MSMEs is the statutory responsibility of the GoI, Ministry of MSME, as per the provisions of the MSMED Act, 2006.
2. 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.”

It also clarified that 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. The ‘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, up to March 31, 2021.

The notification also made a statement to clarify about the Value of Plant and Machinery or Equipment that stated, “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.”

The notification also stated, “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machinery for the purpose of classification as Micro, Small and Medium Enterprises – documents to be relied upon’ are superseded.”

At last, the notification said that the other instructions contained in circular FIDD.MSME & NFS.BC.No.3/06.02.31/2020-21 dated July 2, 2020, remains the same.

With Warm Regards,

CL Bureau.