Whether you have started your own business or already run one, the word NIC code must have appeared while dealing with some government registration or documentation as a business owner. But what is an NIC code and why does it matter for your business? In this guide, we will break down everything you need to know about NIC codes in simple terms—whether you have just started or are managing one.
What is a NIC Code?
NIC is the National Industrial Classification code by the Indian government that classifies businesses into sectors and industries. Such codes help identify and classify different types of businesses across this country. Registering your business under a scheme like GST, or a scheme like Udyog Aadhaar, or seeking various licenses and permits is essential.
The NIC code is a type of tag given to a business that allows government authority and other related bodies to easily retrieve data, offer support, or monitor the growth and efficiency of different sectors.
Why is the NIC Code Important?
Proper understanding and usage of the code of NIC in a company are important for many considerations.
Business Registration: If you register your business, mainly under GST, Udyam, or other schemes under the government, you need to mention the appropriate NIC code. It lets the government know precisely what kind of industry your business belongs to.
Compliance: NIC codes ensure that your business complies with the regulations and tax-related laws. Incorrect use of the NIC code may bring about discomfort or fines on inspection or audit procedures.
Eligibility for Benefits: Government schemes, subsidies, and incentives are generally industry-specific. The right NIC code ensures that your business would be eligible for benefits intended for your industry.
Data Collection & Policy Formation: The NIC codes aid the government in collecting data for policies based on various industries, which play a very significant role in planning and implementing sector-wise developmental strategies.
Structure of NIC Codes
NIC code is a long sequence of numbers, and it classifies a business based on the kind of activities performed. The latest list for NIC code has made available the four-tier hierarchical structure called NIC 2008:
- Section: An industry segment with a broad industry grouping (like manufacturing, retail, IT services, etc.).
- Division: More detailed classification of industrial activities in each category.
- Group Subdivides divisions into small, specific business types.
- Class: The most detailed level and give a name to the nature of your business.
An example would be where a bakery fits under the category of manufacturing, with the food products division and then the class of bakery and related products.
How to Find Your NIC Code
To find the correct NIC code for your business, it is relatively simple. Here’s how you can do it:
- Visit the Official Website: MOSPI, which is the Ministry of Statistics and Programme Implementation, where you can find the official NIC codes. You can surf their website to find one that fits your business activity best.
- Use the following Online Tools: Besides these, you will also find that some of the government portals have a search option. For instance, you can go to the GST registration website, key in the business type and obtain your relevant NIC code.
- Consult a Professional: You can always consult a tax advisor or a professional accountant if you are not sure which NIC code applies to your business.
Recent Updates of NIC Codes
Periodically, updates on new and emerging industries are undertaken as well as on changes in existing ones. In the class of NIC 2008, many newer categories of IT services, e-commerce, and digital industries only existed for a short time.
If the business falls in a relatively dynamic industry, it would do well to periodically review for changes. For example, if you specialize in digital marketing or technology, you should check whether there are new codes of doing things that better describe your business today than they did a few years ago.
When is an NIC Code Required?
You will most likely assign a number of NIC codes to many business processes:
- Company registration: You will also require a NIC code when registering a private limited company, LLP, and even as an MSME under Udyam.
- GST Registration: Now, during the GST registration application form, you will be required to enter your NIC code.
- Licensing and Permits: Perhaps a few local or state-level licenses and permits will also ask for the NIC code.
In all these cases, the correct code is very crucial.
NIC Codes for MSMEs
NIC codes are even more important for Micro, Small, and Medium Enterprises (MSMEs). The government uses the NIC codes for the proper categorization and facilitation of MSMEs that come under different industries. If you register on the Udyam portal, replacing Udyog Aadhaar, you would require the appropriate NIC code that identifies your industry. This would have had an impact on your schemes and incentives eligibility.
Common NIC Codes by Industry
Here’s an overview of some common NIC codes for virtually all industries:
- Retail Trade: 47 (Division)
- Food and Beverage Service Activities: 56 (Division)
- Computing (Computer Programming and Consultancy: 62, Division)
- Construction: 41 (Division)
These are general categories only. You will have to research the actual sub-categories that best describe your business.
Common Mistakes to Avoid with NIC Codes
It is very important to use the right NIC code! Here are a few mistakes to avoid:
Choosing the Wrong Code: Never choose a code because it sounds close to your industry. Ensure that it is only what your business does. For instance, if you have a bakery, classify it under baking and not general food manufacturing. Here is where baking is classified correctly.
Ignoring Updates: NIC codes do change over time. If the nature of your business has changed in some aspect or new classifications are brought in place, update your NIC code to reflect the same for complying.
Missing Extra Business Activities: Generally, most business operation also has multiple primary activities like retail and manufacturing. Get multiple NICs to include all your business activities. Do not forget to add this to the list!!!
How to Update Your NIC Code if Your Business Changes
So, let’s say your business matures or expands or increases. You need to change your NIC code. Here’s how:
Identify the Change: Added a new service or product line? For example, your ladies’ garment retail store now manufactures its own line. You may have to add a new NIC code that defines manufacturing besides retail.
Check New Code: You may visit the MOSPI website or search the GST or Udyam portals to procure an updated NIC code for your new business activity.
Update Your Registration: If you are already registered under GST, Udyam (MSME), or with the Ministry of Corporate Affairs, you can update the NIC by amending registration details online. Note carefully that the new code clearly mirrors your present business activities.
Notifying Tax Advisors: One should inform their tax advisor or accountant of the change so that one’s financial records remain current and are in compliance with the new classification.
Conclusion
The NIC code may seem like an insignificant fraction of your business registration process, but it plays a very fundamental role in ensuring that your business is categorized correctly in government records. And that keeps you on the right side of the law and benefits you as well by availing of different benefits, incentives, and schemes created for your sector.
To start with, one can just look up which NIC code is relevant to his business, and ensure that it is used during registration, keeping up with changes or updates in the NIC list which could involve them. This will ensure that you can run your business properly without needing to worry about increased penalties by letting you know and using the appropriate NIC code.
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Frequently asked questions
What is NIC code?
NIC is an abbreviation for National Industrial Classification. It is a unique number assigned by the Indian Government to classify business under some industrial categories; therefore it helps identify what kind of business you are into, whether manufacturing, retail, IT services, or any other type of business.
What’s the importance of NIC code in my business?
NIC codes are necessary for the registration of business, tax compliance, and license application. The proper use of the correct NIC code classifies your business correctly so that you can enjoy governmental subsidies and remain in a legal state.
How do I get my business’s NIC code?
NIC code also is available on the MOSPI website. Sometimes, while registering for GST or Udyam (MSME), you will get the facility to search for that code right there on their platforms.
Are all businesses required to have an NIC code?
Yes, all the registered businesses in India must be using the correct NIC code for all their governmental registrations such as GST, Udyam, or company registration. This way, your business falls under the correct category in the official record book.
How do I determine the correct NIC code for my business?
You will be able to choose the NIC code that best identifies the primary activity of your business. If you don’t know how to choose a suitable code, there is a list of NIC codes available online to help you pick the right one or you can even consult a tax advisor to assist you in picking the right one too.
What happens if I make the wrong choice and use the wrong NIC code?
Incorrect NIC codes may lead to errors with some government filings, might bring about compliance, and sometimes may lead to penalties. Moreover, it might affect the benefits or schemes related to a particular industry from the government.
Are there specifically designed NIC codes for MSMEs?
Now, whereas the very same system of NIC code is resorted to by MSMEs, particularly becomes important during Udyam registration for them. Only with the right NIC code is your MSME properly placed for government support and incentives.
Do NIC codes change over time?
Periodically the NIC code system updates with new industries or changes in existing ones. Therefore, the most updated version would be NIC 2008, and it would be a good idea to have an updated one if the business activities changed.
Can a business have more than one NIC code?
Yes. If you have a lot of things happening in your business, then you may need more than one NIC code. A retail outlet and food processing unit are two different businesses, hence you would need to issue different codes for each section of your business.
How much does an NIC cost?
No, registration for a NIC code is part of the procedure while signing up under GST, Udyam (MSME), or other business registrations. There is no charge for the code itself.
