Reiterating a recent clarification by Ministry of Micro, Small and Medium Enterprises, the Reserve Bank of India (RBI) has clarified that the value of plant and machinery or equipment for all purposes of the Notification No. S.O. 2119(E) dated June 26, 2020 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, 1961 and not cost of acquisition or original price.

RBI’s earlier Circular dated July 13, 2017 stating that for the investment in plant and machinery for the purpose of classification of an enterprise as Micro, Small or Medium, the purchase value of the plant and machinery is to be reckoned and not the book value (purchase value minus depreciation), has been now superseded on August 21, 2020.

It may be noted that by Notification dated June 26, the Ministry of MSME had notified certain criteria for classifying the enterprises as micro, small and medium enterprises. According to the Notification, an enterprise shall be classified as a micro, small or medium enterprise on the basis of the following new composite criteria, namely:

  • a micro enterprise, where the investment in plant and machinery or equipment does not exceed one crore rupees and turnover does not exceed five crore rupees;
  • a small enterprise, where the investment in plant and machinery or equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees; and
  • a medium enterprise, where the investment in plant and machinery or equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees.

Further, according to the latest RBI Circular,

  • Classification / re-classification of MSMEs is the statutory responsibility of the Government of India, Ministry of MSME.
  • All lenders should obtain ‘Udyam Registration Certificate’ from the entrepreneurs.
  • All enterprises registered till June 30, 2020, have to file new registration in the Udyam Registration Portal well before March 31, 2021.
  • ‘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, up to March 31, 2021.