In India, the Micro, Small, and Medium Enterprises (MSMEs) sector plays a pivotal role in driving economic growth, generating employment, and fostering innovation. To promote and support this vital sector, the government introduced various schemes and initiatives, including the recent Udyam Registration. This article aims to shed light on the key differences between Udyam Registration and MSME Registration, highlighting their unique features, benefits, and processes.
Understanding Udyam Registration:
Udyam Registration is a new system introduced by the Government of India, replacing the earlier process of MSME Registration. Launched on July 1, 2020, it aims to simplify the registration process and provide additional benefits to MSMEs. The registration is entirely online and has been integrated into the Udyam Registration portal.
Under the previous MSME registration process, businesses were categorized based on their investment in plant and machinery for manufacturing units or equipment for service enterprises. Micro, Small, and Medium enterprises were defined based on these investment limits.
With the introduction of Udyam Registration, the criteria have been revised, and the classification is now based on the turnover of the business. Micro-enterprises are those with a turnover of up to Rs. 5 Crores, Small enterprises with up to Rs. 50 Crores, and Medium enterprises with up to Rs. 250 Crores turnover.
The earlier MSME Registration process involved filling out a form with details such as business name, type, address, investment in plant and machinery, etc. This form was available on the Udyog Aadhaar Memorandum (UAM) portal.
The Udyam Registration process is much simpler. Entrepreneurs can register by providing their Aadhaar number, PAN card details, and self-declaration of the turnover of their business. No further documentation is required at the time of registration.
Validity of Registration:
The MSME Registration certificate was issued for a lifetime and did not require any renewal or update unless there was a change in business details.
In contrast, the Udyam Registration certificate needs to be renewed periodically. The validity of the registration is for a period of one year. Entities must update their information and turnover details before the expiry of the certificate.
Earlier, the MSME registration process was entirely free of cost, and entrepreneurs could obtain the registration certificate without any charges.
While Udyam Registration is also nominally priced, the registration process now incurs a small fee for obtaining the Udyam Registration certificate. The fee structure is modest and varies depending on the type of enterprise.
The earlier MSME registration was based on self-declared investment in plant and machinery or equipment. This information was used to categorize businesses as Micro, Small, or Medium enterprises.
Under the new system, the classification is solely based on the self-declared turnover. The turnover figures are used to determine the appropriate category of MSME.
Documentation and Transparency:
The MSME registration process involved some documentation, such as copies of the business’s PAN card and other relevant certificates.
With Udyam Registration, the process has become more transparent and straightforward. The focus is on self-declaration, making it easier for businesses to register and obtain their certificates.
See Also: Update Udyam Certificate
The introduction of Udyam Registration has brought significant changes to the MSME registration process in India. By shifting the classification criteria from investment to turnover and simplifying the registration process, the government aims to facilitate the growth of MSMEs and foster a more business-friendly environment. Entrepreneurs and business owners should be aware of these key differences to make an informed decision while registering their ventures. It is essential to understand the benefits and requirements of both systems and choose the most suitable one to avail the advantages offered to MSMEs in India.