The Micro, Small and Medium Enterprises (MSME) sector plays a crucial role in the growth of the Indian economy. It makes a significant contribution towards India’s GDP, employment and exports. Further, this sector acts as a backbone of the Indian entrepreneurship.
Currently , MSMEs contribute close to 6.11% of the manufacturing GDP and 24.63% of the GDP from service activities. In addition to this, 33.4% of India’s manufacturing output comes from the MSME sector, providing employment to around 120 million people and contributing around 45% of the overall exports from India.
Since 20% of the MSMEs operate out of rural areas, it provides employment to a huge chunk of rural workforce. Thus, MSME sector plays an important role in boosting sustainable and inclusive development thereby reducing regional disparity and ensuring equitable distribution of national income and wealth.
Thus, in order to provide benefits such as trouble free access to finance and promoting ease of doing business, Udyog Aadhaar was introduced by the Ministry of MSME.
Given this backdrop, let’s understand what is Udyog Aadhaar, its benefits and process of registration.
What is Udyog Aadhaar?
Prior to the implementation of the MSME Development Act 2006, MSME sector was defined as the Small Scale Industries (SSIs) sector. The constituent small and auxiliary units of the SSI sector were defined based on the periodic criteria for defining such units.
With the coming of the MSME Development Act, 2006, the scope of MSME sector was extended. In place of simply industries as under SSI, the concept of ‘enterprise’ was introduced to include both manufacturing and service sectors.
Following the implementation of the MSME Development Act, 2006, the registration process for the MSMEs involved filing of two forms. These included Entrepreneurs Memorandum I (EM I) and Entrepreneurs Memorandum II (EM II). Where EM I was for the proposed or upcoming enterprises and discretionary in nature, EM II was required to be filed by the existing enterprises.
Further, EM II was required to be filed with District Industries Centre (DIC) in the concerned state or union territory immediately after the project kicks off.
In order to promote ease of doing business and simplify the process of MSME registration further, the Ministry of MSME introduced the Udyog Aadhaar registration.
Udyog Aadhaar Registration is basically a single page online registration of the MSME. Under Udyog Aadhaar, the MSMEs can register via self declaration in Udyog Aadhaar Memorandum (UAM), with no additional documents to be submitted for the same.
Further, the MSMEs are not required to pay any fees and can file more than one Udyog Aadhaar with the same Aadhaar number.
Classification of Micro, Small and Medium Enterprises as per MSMED Act, 2006
According to the MSMED Act 2006, Micro, Small and Medium Enterprises are classified into following two categories:
These are the enterprises that are either:
- involved in the manufacturing or production of goods concerning the industries specified in Industries (Development and Regulation) Act 1951
- using plant and machinery for adding value to the final goods having a different use, character and name.
Further, a manufacturing unit is defined in terms of amount invested in plant and machinery by such a unit.
These are the enterprises that are involved in providing services. Such units are defined in terms of investment made in equipment used for rendering services.
Following is the limit for investment in plant and machinery/equipment by manufacturing and service entreprises to be classified as Micro, Medium and Small Enterprises.
|Enterprises||UAM Category||Type||Amount invested in Plant and Machinery/Equipment|
|Micro Entreprises||A||Manufacturing||Does not exceed Rs. 25 lakhs|
|B||Service||Does not exceed Rs. 10 lakhs|
|Small Entreprises||B||Manufacturing||More than Rs 25 Lakhs but does not exceed Rs 5 Crores|
|E||Service||More than Rs 10 Lakhs but does not exceed Rs 2 Crores|
|Medium Entreprises||C||Manufacturing||More than Rs 5 Crores but does not exceed Rs 10 Crores|
|F||Service||More than Rs 2 Crores but does not exceed Rs 5 Crores|
What is Udyog Aadhaar Memorandum (UAM)?
- Udyog Aadhaar Memorandum (UAM) is a single page registration form. It comprises of a self declaration format through which the MSME seeking registration self certifies its existence, bank account details, owner’s Aadhaar details and other basic information as required.
- All Micro, Small and Medium enterprises manufacturing of goods or providing services are required to file UAM. Provided such MSMEs fall within the turnover limits mentioned in section 7 of the MSMED Act, 2006.
- These MSMEs are required to specify the number of activities including manufacturing of services in the UAM. Further, the following individuals according to the type of business structures are required to furnish Aadhaar Number in the Memorandum. These individuals are as follows:
- However, in the following cases, the PAN of the organization along with Aadhaar Number of the authorized signatory also needs to be mentioned in the UAM. These include:
- The MSME seeking registration is not required to pay any fee for filing UAM
- MSME can fill the UAM by visiting https://udyogaadhaar, the online portal supported by the Ministry of MSME for MSME registration.
Individuals having Aadhaar Number can undertake Udyog Aadhaar registration online themselves. However, having an Aadhaar Number is not necessary for registering as an MSME under Udyog Aadhaar. Accordingly, there are two ways in which MSME can register under Udyog Aadhaar.
- With Aadhaar
- Without Aadhaar
Here is an infographic that explains in a simple way what is Udyog Aadhaar and who all need to register for Udyog Aadhaar.