Value of Plant & Machinery or Equipment for MSMES new Definition -RBI withdraws Circular

Value of Plant & Machinery or Equipment for MSMEs new Definition-RBI withdraws its Circular in view of Govt. clarification 

The Government had recently notified new criteria for classifying MSMEs.

The RBI then issued a circular suggesting documents that can be relied upon by banks for arriving at investment in plant and machinery for the purpose of classification as Micro, Small and Medium Enterprises  

Subsequently, the Ministry of MSME, vide their Office Memorandum (OM) No.2/1(5)/2019 – P & G/Policy (pt. IV) dated August 6, 2020 and letter F.No.5/2(2)/2020 – P & G/Policy dated August 13, 2020 had inter alia, clarified the following:

Classification of Enterprises as per new definition

(i) Classification / re-classification of MSMEs is the statutory responsibility of the GoI, Ministry of MSME, as per the provisions of the MSMED Act, 2006.

(ii) 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.

Validity of EM Part II and UAMs issued till June 30, 2020

(i) 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.

(ii) ‘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, upto March 31, 2021.

Value of Plant and Machinery or Equipment

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 said notification 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.

In view of the above, the RBI has suspended the said circular on documents to be relied upon for investment in plant and machinery for the purpose of classification as MSMES

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