Udyam registration is a process by which small businesses in India can register themselves with the Ministry of Micro, Small, and Medium Enterprises (MSME). It provides various benefits to registered businesses, such as access to government schemes, subsidies, and loans. However, not all small businesses are eligible for Udyam registration. The eligibility criteria for Udyam registration are as mentioned below:
Definition of MSME
The first eligibility criteria for Udyam registration is to meet the definition of a micro, small, or medium enterprise as per the MSME Act 2006. The act defines MSMEs based on their investment in plants, machinery, or equipment for manufacturing or service enterprises.
- Micro Enterprise: If the investment in plants, machinery, or equipment for manufacturing or service enterprises is at most Rs.1 crore and Rs.5 crore, respectively.
- Small Enterprise: If the investment in plants, machinery, or equipment for manufacturing or service enterprises is more significant than Rs.1 crore but is at most Rs.10 crore and Rs.50 crore, respectively.
- Medium Enterprise: If the investment in plant and machinery or equipment for manufacturing or service enterprises is more than Rs.10 crore but is at most Rs.50 crore and Rs.250 crore, respectively.
Business Entity Type
The second eligibility criterion for Udyam registration is that the business entity should be a sole proprietorship, partnership firm, LLP, or private limited company. One Person Companies (OPCs) and Public limited companies are not eligible for Udyam registration.
Aadhaar Number
The third eligibility criterion for Udyam registration is that the business owner must have a valid Aadhaar number. The Aadhaar number will be used to verify the business owner’s identity during registration.
Previous Registration
If a business has registered under the MSME Act 2006 or the Udyog Aadhaar Memorandum (UAM) before 30th June 2020, it must re-register under Udyam registration by December 31, 2021. Failing to do so will end in the cancellation of the prior registration.
Exclusions
Certain businesses are excluded from the eligibility criteria for Udyam registration. These include:
- Businesses producing, selling, or consuming any of the banned items listed by the Ministry of Commerce and Industry.
- Businesses that have defaulted on loans from banks or financial institutions are classified as Non-Performing Assets (NPAs).
- Businesses that any government agency has blacklisted for any reason.
Turnover Limit
From April 1, 2021, the Government of India has implemented a new criterion for MSME classification based on annual turnover instead of investment in plant and machinery or equipment. This criterion is also applicable to Udyam registration. The turnover limits for each category are:
- Micro Enterprise: turnover up to Rs.5 crore
- Small enterprise: turnover between Rs.5 crore and Rs.50 crore
- Medium enterprise: turnover between Rs.50 crore and Rs.250 crore
Therefore, to be eligible for Udyam registration, a business must fall under the turnover limits as per their category.
Udyam registration provides various benefits for small businesses in India, and businesses need to understand the eligibility criteria to take advantage of these benefits. By meeting the eligibility criteria and registering under Udyam, small businesses can access various government schemes, subsidies, and loans to help them grow and prosper.