Udyam Registration

What it means

Udyam Registration is the free, online, paperless registration that gives a business official MSME (Micro, Small or Medium Enterprise) status. On registration the business gets a permanent Udyam Registration Number and an e-certificate. This status opens access to government schemes, priority sector bank loans and legal protection against delayed payments from buyers.

How it works

Registration is done on the official Udyam portal using the Aadhaar of the proprietor, partner or authorised signatory. Investment and turnover figures are picked up automatically from the income tax and GST systems, so there is no need to upload documents. Since April 2025 the classification limits are:

• Micro: investment in plant, machinery or equipment up to ₹2.5 crore and turnover up to ₹10 crore.

• Small: investment up to ₹25 crore and turnover up to ₹100 crore.

• Medium: investment up to ₹125 crore and turnover up to ₹500 crore.

• Both conditions must be met. If either limit is crossed, the business moves to the next category.

• Export turnover is excluded when computing turnover.

• PAN is mandatory, and GSTIN is required where the business is liable to GST registration.

• There is no fee for registration. Beware of websites that charge for it.

Example

A Rajkot engineering unit has the following figures:

1. Investment in machinery: ₹2,00,00,000 (₹2 crore), within the ₹2.5 crore micro limit.

2. Total turnover: ₹14 crore, of which exports are ₹5 crore.

3. Turnover for classification: ₹14 crore - ₹5 crore = ₹9 crore, within the ₹10 crore micro limit.

4. Result: the unit is a micro enterprise.

As a registered micro unit, if a buyer company takes 90 days to pay a ₹5,00,000 bill despite a written agreement for 45 days, the buyer owes compound interest at three times the RBI bank rate under the MSMED Act. The buyer also cannot claim the ₹5,00,000 as an expense in its income tax computation until it actually pays.

Key points to remember

• Buyers must pay MSME suppliers within 15 days, or within 45 days if agreed in writing. Mention your Udyam number on every invoice.

• The tax disallowance for late payment applies only to dues to micro and small enterprises that are manufacturers or service providers, not traders.

• Update your Udyam details when ownership, address or business activity changes.

• Classification is updated automatically each year based on ITR and GST data, so check your category every year.

• Only one Udyam registration is allowed per PAN. Add multiple units or activities to the same registration.