Udyam Registration for MSMEs: Eligibility, Benefits and Documents

Udyam replaced Udyog Aadhaar on 1 July 2020. The idea behind it is simple. The government already holds your PAN, income-tax returns and GST returns, so instead of asking you to declare your investment and turnover and prove them, the portal reads them from those records and classifies the enterprise for you. What you provide is mostly identity and a description of the business.

Which businesses count as micro, small or medium?

Exports are left out of turnover for this purpose. Because both limits must be met, a business with very little machinery but turnover above ₹10 crore is not micro; it is classified by whichever measure puts it higher.

Can traders and very small businesses register?

Yes, with limits. Since an office memorandum of 2 July 2021, retail and wholesale traders may register on the Udyam portal, but only for the purpose of priority sector lending by banks. Other MSME benefits are not extended to them by that registration.

Very small businesses that are not required to file GST returns, and so may have no GSTIN, are covered by the Udyam Assist Platform, launched on 11 January 2023 and run with SIDBI. Registration there is done with the help of a designated agency such as a bank or NBFC, and the certificate it issues is treated at par with a Udyam certificate for priority sector lending.

What do you need to register?

How do you register on the Udyam portal?

1. 1

   Open the official portal

   Go to udyamregistration.gov.in and choose the option for new entrepreneurs not yet registered as an MSME. Check the address in your browser before entering Aadhaar or PAN.

2. 2

   Verify Aadhaar

   Enter the Aadhaar number and the name exactly as it appears on it, and verify with the OTP.

3. 3

   Validate PAN

   Select the type of organisation and enter the PAN. The portal validates it and pulls in income-tax and GST details where they exist.

4. 4

   Complete the form

   Enter the enterprise's name, units and their addresses, official address, date of commencement, bank details, activity and NIC codes, employees and any figures the portal could not fetch.

5. 5

   Submit and receive the certificate

   Submit with the final OTP. A Udyam Registration Number is issued, and the e-certificate can be downloaded from the portal.

What benefits follow, and on what conditions?

• Protection against late payment. Under sections 15 and 16 of the MSMED Act, 2006, a buyer must pay a micro or small enterprise supplier within the agreed period, which cannot exceed 45 days from acceptance of the goods or services, or within 15 days where no period is agreed. Late payment carries compound interest at three times the RBI bank rate. Disputes can be taken to the Micro and Small Enterprises Facilitation Council through MSME Samadhaan. This applies to micro and small suppliers of goods and services, not to medium enterprises, and not to traders registered only for priority sector lending.
• A tax reason for buyers to pay on time. Under the income-tax law, a buyer's deduction for an amount owed to a micro or small enterprise supplier is deferred until it is actually paid, if payment is later than the MSMED Act allows. In practice this gives larger buyers a reason to ask suppliers for their Udyam details.
• Priority sector lending. Banks count loans to registered MSMEs towards their priority sector targets, which affects how some lending is offered. It does not create an entitlement to a loan.
• Credit guarantee and schemes. Collateral-free credit under the CGTMSE scheme and various central and state schemes use Udyam registration as a starting condition. Each scheme sets its own further conditions.
• Public procurement. Government buyers source a share of their purchases from micro and small enterprises, and tender documents often grant registered MSEs concessions such as exemption from earnest money. The tender, not the registration, decides what applies.

What happens after registration?

There is no renewal. The registration number is permanent. You are expected to keep the information current on the portal, including details from the previous year's income-tax and GST returns, and the classification is updated from government data.

When an enterprise grows into a higher category, it keeps its existing status until one year after the close of the year of registration. When it falls into a lower category, it stays in its present category until the end of that financial year and moves down from the following 1 April. The portal communicates changes of category to the enterprise.

What does Udyam registration not do?

• It does not create a legal entity, register a partnership or incorporate a company.
• It does not replace GST, which follows its own thresholds; see our GST registration guide.
• It does not replace state registrations such as the Gujarat Shops and Establishments Act or any trade licence.
• It does not guarantee a loan, a subsidy or a contract.

For a proprietorship it plays a practical role: because a proprietorship has no certificate of its own, banks often accept the Udyam certificate as one of the proofs that the business exists. That is why Raulji Group includes it when setting up a proprietorship.