The Ministry of MSME, through the MSME Act, has laid down a framework to promote micro, small and medium enterprises and provide required support for their sustenance and growth. In order to do so, it has created a National Industrial Classification for all economic activities carried out by businesses across India. This National Industrial Classification which is commonly known as NIC Code was created in partnership with the Central Statistical Organization which operated under the Ministry of Statistics and Programme Implementation. The current version of the National Industrial Classification being used was developed in 2008, whereas this task initially commenced in 1960 various versions have been used till date. The latest version currently used was adopted in 2008.
The structure of the NIC Code is primarily divided into 3 groups:
Primary Production
This consists of Agriculture and Mining related activities.
Secondary Production
This consists of Manufacturing and Construction related activities.
Services
This consists of all services such as commerce, administration, transport, telecommunication, etc.
In the previous or older system of Udyog Aadhar Registration there were various activities under the NIC code which were included and excluded from the scope of the Scheme to provide benefits or assistance to MSMEs. As per the Office Memorandum numbered UAM/MC/01/2017-SME activities stated below would be excluded from the scope of the Micro, Small, and Medium Enterprise Development Act, 2006. The activities were:
| NIC Code | Activities NOT Included |
|---|---|
| 01 | Activities of Crop, Animal production, hunting, and related activities |
| 02 | Forestry and logging |
| 03 | Fishing and aquaculture |
| 45 | All type of Wholesale and retail trade, repair of motor vehicle or motorcycles |
| 46 | All type of Wholesale trade, except of Motor vehicles and motorcycles |
| 47 | All type of Retail Trade, except of Motor vehicles and motorcycles |
| 97 | Activities of households as employees for domestic personnel |
| 98 | Undifferentiated goods and services producing activities of private households for own use |
| 99 | Activities of extraterritorial organization and bodies |
After siting various drawbacks in the current system the Ministry of MSME, through the new system of Udyam Registration has aimed at creating a better platform for everyone genuinely making an effort to sustain their businesses in India.
The Ministry of MSME, vide Office Memorandum F.No. 5/2(1)/2020/E has stated the following:
- 1) Activities under NIC Code 92 which include activities of Gambling and betting activities will also not be covered the new scheme.
- 2) Even though the activities covered under NIC Code 45 are barred from registration as MSMEs, keeping in view the current circumstances the following activities having the respective 5-digit NIC code under section 45 will be allowed to obtain registration as MSMEs:
- •NIC Code 45200 – Includes activities of Maintenance and repair of motor vehicles
- •NIC Code 45403 – Includes activities of Maintenance and repair of motor cycles, mopeds, scooters, and three wheelers
- 3)Activities covered under the NIC Code 01 will not be allowed except the following activities which are included in the sub-classes of NIC code 01 and have these respective 5 digit NIC codes:
NIC Code Activities Allowed 01462 Production of eggs 01463 Operation of Poultry hatcheries 01492 Bee-keeping and production of honey and beeswax 01493 Raising of silk-worms, production of silk-worm cocoons 01612 Operation of agriculture irrigation equipment 01620 Support activities for animal production 01631 Preparation of crops of primary markets i.e. cleaning, trimming, grading disinfecting 01632 Cotton ginning, cleaning and bailing 01633 Preparation of tobacco leaves 01639 Other post-harvest crop activities 01640 Seed processing for propagation The above mentioned activities are allowed to apply for Udyam Registration and get benefits granted by the Ministry of MSME. All other activities covered under NIC Code 01 are not allowed to apply for their Udyam Registration and will not be granted any benefits under the MSME Scheme.
The news was circulated recently that all activities of Retail and Wholesale trade have also been allowed registration as MSME but no such circular or office memorandum from the Ministry of MSME has been issued yet. As retailers and wholesalers across the country express their unhappiness about keeping them out of the new system. Due to this the Ministry of MSME, keeping in mind the current pandemic situation has lend a hand of support by allowing Retailers and Wholesalers to avail Guaranteed Emergency credit which is normally made available to only registered MSMEs. If the government will allow Retailers or Wholesalers to obtain registration is something to watch out for in the coming budgets.
