UDYAM REGISTRATION VS. OLD MSME PROCESS: WHAT’S CHANGED AND WHY IT MATTERS

Udyam Registration vs. Old MSME Process: What’s Changed and Why It Matters

Udyam Registration vs. Old MSME Process: What’s Changed and Why It Matters

Blog Article

In July 2020, the Indian government introduced Udyam Registration as a simplified online process to register Micro, Small, and Medium Enterprises (MSMEs). This replaced the older system of Udyog Aadhaar Memorandum (UAM) and previous MSME registration processes. While the shift may seem like a routine update, it brought along substantial improvements in transparency, ease of registration, and long-term benefits for business owners. In this blog, we’ll compare Udyam Registration vs. the old MSME process, highlight the major changes, and explain why it matters for entrepreneurs and small businesses across India.

Understanding the Old MSME Registration (Udyog Aadhaar)


Before Udyam Registration came into existence, MSMEs registered under the Udyog Aadhaar Memorandum (UAM). It was introduced in 2015 to simplify the existing process, replacing the older EM-I and EM-II filing systems.

Key Features of the Udyog Aadhaar System:



  • Required only the Aadhaar number and basic business information

  • Completely self-declared process

  • Issued instantly without document verification

  • No linkage with other government databases like PAN or GST


While UAM simplified registration at the time, it also led to issues like:

  • Duplicate registrations

  • Lack of data validation

  • Limited tracking of real-time enterprise status


What Is Udyam Registration?


The Udyam Registration system was introduced by the Ministry of MSME on 1st July 2020. It was designed to address the loopholes of the Udyog Aadhaar system while making the registration more credible and data-driven.

Key Features of Udyam Registration:



  • Paperless and online process

  • PAN and GSTIN validation mandatory

  • Integration with Income Tax and GST portals

  • Automated classification of enterprise size

  • One registration per PAN number


Major Differences: Udyam Registration vs. Old MSME (UAM)


Let’s look at a detailed comparison:

Registration Type



  • Udyog Aadhaar (Old): Self-declared, minimal validation

  • Udyam Registration (New): Verified through PAN & GST databases


Mandatory Documents



  • Udyog Aadhaar (Old): Aadhaar only

  • Udyam Registration (New): Aadhaar, PAN, GSTIN


Verification Process



  • Udyog Aadhaar (Old): No cross-verification

  • Udyam Registration (New): Real-time data validation


Classification Criteria



  • Udyog Aadhaar (Old): Based on investment only

  • Udyam Registration (New): Based on both investment & turnover


Enterprise Classification



  • Udyog Aadhaar (Old): Manual selection

  • Udyam Registration (New): Automatic classification by the system


Certificate Issuance



  • Udyog Aadhaar (Old): Immediate but less credible

  • Udyam Registration (New): Delayed but validated and trusted


Link to Other Portals



  • Udyog Aadhaar (Old): None

  • Udyam Registration (New): Linked with Income Tax, GST & banks


Key Improvements with Udyam Registration


1. PAN and GSTIN Integration


Udyam requires businesses to provide their PAN and GSTIN, which ensures each business is uniquely identified. This eliminates multiple registrations for the same business and boosts data accuracy.

2. Automated Enterprise Classification


In the Udyam system, businesses are automatically classified as Micro, Small, or Medium based on their annual turnover and investment. This is updated in real-time using government databases.

3. Elimination of Human Error


Since data is pulled directly from PAN and GST systems, the chances of errors in classification, registration, and reporting are drastically reduced.

4. Stronger Legal Identity


Udyam Registration provides a legal business identity accepted across all government departments, banks, and procurement platforms like GeM (Government e-Marketplace).

Why This Change Matters to MSMEs


A. Improved Access to Benefits


With real-time data validation, only genuine businesses are now able to claim government subsidies, loans, and schemes. This ensures that benefits are not misused and reach the right businesses.

B. Ease of Doing Business


The automated nature of Udyam Registration removes the need for paperwork, middlemen, or physical visits. This aligns with the government’s Digital India mission and promotes a more business-friendly environment.

C. Transparency and Trust


Udyam enhances the credibility of MSMEs in the eyes of:

  • Banks and financial institutions

  • Government buyers

  • Export promotion councils

  • Private sector partners


This trust factor can lead to better opportunities in terms of funding and contracts.

D. Enables Global Trade


For MSMEs wanting to register on international platforms like Amazon Global or apply for IEC (Import Export Code), Udyam Registration acts as the first step to prove their business legitimacy.

What Should Existing Udyog Aadhaar Holders Do?


If your business was registered under the old Udyog Aadhaar system, you were required to migrate to Udyam Registration before 31st December 2021. Failure to migrate may result in ineligibility for government schemes and benefits. You can still register on the Udyam portal by using your UAM number and completing the necessary updates with PAN and GSTIN.

How to Register Under Udyam


 

  • Access the Udyam Portal: Launch your web browser and navigate to the official Udyam Registration website.


  • Provide Business Information: Carefully fill out the application form with accurate details such as your business name, type, address, and bank account information.


  • Verify and Submit: Double-check all the entered information for accuracy, then submit your application.


  • Make the Payment: Choose your preferred payment method and complete the registration fee payment online.


  • Receive OTP: An OTP (One-Time Password) will be sent to the mobile number linked to your Aadhaar.


  • Enter OTP for Verification: Input the OTP on the portal to confirm your identity.


  • Finalize Registration: After successful verification, your registration will be processed and completed.


  • Get Your Certificate: Once approved, your Udyam Registration certificate will be issued and sent to your registered email address.


Note: Print Udyam Certificate through the Udyam portal

Conclusion


The shift from Udyog Aadhaar to Udyam Registration marks a significant milestone in India's effort to streamline MSME support systems. By emphasizing accuracy, verification, and digital connectivity, Udyam Registration creates a robust foundation for small businesses to thrive. Whether you are starting a new enterprise or have an existing MSME, migrating to Udyam isn’t just about compliance — it’s about unlocking new opportunities and ensuring long-term sustainability.

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