MSMEs are classified according to their investment in plants and machinery. Regardless, this definitional approach has long been questioned because authorities did not have easy access to credible and detailed facts about investments. As a result, the Union Cabinet decided in February 2018 to shift the foundation to “yearly turnover,” which was more in line with the GST burden.

Also, Read- udyam registration

Following the Advisory Committee’s recommendations, the Central Government has announced specific requirements for classifying businesses as micro, small, and medium businesses, as well as the structure and mechanism for recording updates (Udyam Registration), which will take effect on July 1, 2020.

Anyone who wants to launch a micro, small, or medium business can complete a self-declaration Udyam Registration via the Udyam Registration platform. Registration for Udyam has no costs associated with it. In order to register for Udyam, the proprietor, partner, promoter, director, or Karta must have a valid aadhaar number.


  1. All current enterprises registered under EM–Part-II or UAM must re-register on the Udyam Registration portal on or after July 1, 2020.
  1. All businesses that were registered before June 30, 2020, will be classed in accordance with this notice.
  1. Existing firms that were established before June 30, 2020, will only be valid until December 31, 2021.
  1. Any company that is already registered with another Ministry of Micro, Small, and Medium Enterprises agency is required to register with Udyam Registration as well.

How can you figure out how much money you’re going to spend on plants and machinery and how much money you’re going to make as a small business owner?

In the event of an existing business, the investment amount is determined using the information from the previous ITR. In the event of a new business, the promoter must self-declare the amount of investment to be considered.

Incorporation and exclusion from the investment amount calculation:


  • Assets in physical form
  • Excluding GST, the purchase price of used or new plant and machinery.


  • Construction and Land
  • Fittings and furnishings

Inclusion and exclusion from the Turnover calculation:

In the case of a new business, the turnover information must be taken from the previous ITR. In the event of a new business, the promoter must make a self-declaration in order to assess the investment amount.

Procedure for registering an existing business with UDYAM:

All businesses that were categorized using the old approach before June 30, 2020, will be reclassified. Existing business registered till March 30, 2020 – valid until December 31, 2021. Suspension of registration if you do not update before the deadline. The classification will be updated based on the most recent information. The registration procedure for UDYAM is as follows:

Step 1: go to the udyam registration portal

Choose an option. “For those who have previously signed up for EM-II or UAM.”

Step 2: Enter your Udyog Aadhaar information and choose whether you want your OTP sent to your phone or to your registered email address.

Now, go to “Validate & Generate OTP” and input the OTP number that was sent to your phone or email address, then select Validate.

Your Udyog Aadhaar will be successfully validated.

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