Udyam Portal: Here’s how govt is marking financial years to classify businesses as MSMEs for registration

Ease of Doing Business for MSMEs: The classification of MSMEs through the Udyam portal was put in place with effect from July 1, 2020, when the portal was launched. The government had revised the MSME definition last year to provide post-Covid benefits to more enterprises that were earlier outside the realm of the MSME sector.

Ease of Doing Business for MSMEs: MSME Ministry has issued a clarification to the queries raised by MSMEs with respect to the selection of the financial year for providing 

data related to investment, turnover, and export value for classification as MSME while registering their units on the new Udyam Registration portal. The classification of MSMEs through the Udyam portal was put in place with effect from July 1, 2020, when the portal was launched. The government had revised the MSME definition last year to provide post- Covid benefits to more enterprises that were earlier outside the realm of the MSME sector.

?Ministry of MSME has received a number of representations from MSMEs and industry associations and other MSME stakeholders with respect to the selection of the year of data in respect of Investment and Turnover and also of the export value for the MSME classification while registering on Udyam Porta,? the clarification dated September 29, 2021, read.

The government said that the data which gets auto-filled or fetched (for enterprises who have filed IT and GST Returns) from the IT Department and Goods and Service Tax Network (GSTN) is the data which had been finalised by the two respective departments after rectification, wherever necessary, for the relevant financial year. The query, however, was around defining the financial year for picking relevant data for registration on the new portal.

?MSME classification said companies will be considered an MSME if the turnover is below Rs 250 crore. The classification came in May last year and so confusion was which financial year MSMEs should consider – FY19 or FY20 — to provide data for registration on the portal. If a company has to decide whether it is an MSME or not, they will have to look at the result of FY19. This means if the company was registering on the portal last year and its turnover in FY19 was less than Rs 250 crore, it would be considered as an MSME even if in FY20 the turnover turns out to be more than that,? Umesh Balani, MD and CEO, Rotomag Motors and Controls, and Chairman, MSME Development Council, Assocham told Financial Express Online.

Moreover, due to Covid-related challenges, the deadline for submission of GST returns and IT returns were extended last year even as the filing of the returns is usually sought by September or October by the government. Hence, for registration, let’s say the last financial year 2020-21, the data for FY19 was picked as FY20 data wouldn’t have been available before December. This was clarified by the government in its note.

?For FY19, the timeline for filing of IT Return was July 2019 and time may be required for further processing. In the case of companies/ enterprises, the accounts get audited and completed by October or November 2019. Also, the process of GST Return for the Financial Year 2018-19 follows similar timelines. Hence, frozen data of 2018-19 has been considered for MSME registration and classification during the year 2020-21,? the clarification said. Similarly, for registrations in FY22, the data from FY20 will be taken and for FY23, data from FY21 will be sourced.

?Days were extended to file returns for both GST and IT. For an MSME, the date of filing a return was December 31 and not July last year. So, the government is picking FY19 data and not FY20 data that had come late for MSMEs registering last year. Likewise, if I apply for registration today, there won’t be any GST return or IT return data for FY21. So, naturally, the govt will have to take FY20 data,? Rajiv Chawla, Chairman at the MSME association — IamSMEofIndia had told Financial Express Online.