Classification of MSME in India
Government of India enacted Micro, Small and Medium Enterprises
Development Act, 2005 (MSME Act) under which classification
of micro, small and medium enterprises (MSME) was dependent on two
factors:
1) Investment in plant and machinery; and
2) Turnover of the enterprise. It is also pertinent to note that different
thresholds were prescribed for being classified as an MSME based
on the aforesaid factors, for enterprises engaged in manufacturing
and services sector.
However, recently, under Aatmanirbhar Bharat Abhiyan (ABA),
Ministry of Micro, Small and Medium Enterprises, vide its notification
dated June 1, 2020, revised MSME classification by inserting a
composite criterion for both investment in plant and machinery and
annual turnover of enterprises. Also, the distinction between the
manufacturing and the services sectors under erstwhile MSME definition
has been done away with. This removal will create parity between the
sectors.
A comparison of the erstwhile MSME classification to the revised
classification where the investment and annual turnover, both are to be
considered for classification of an enterprise as an MSME, is set out
below:
Erstwhile MSME Classification
Criteria: Investment in Plant and Machinery/Equipment
Classification Micro Small Medium
Investment not Investment not Investment not
Manufacturin
more than INR more than INR 5 more than INR
g Enterprises
25 lakhs crores 10 crores
Enterprises Investment not Investment not Investment not
rendering more than INR more than INR 2 more than INR 5
Services 10 lakhs crores crores
Revised MSME Classification (w.e.f. July 1, 2020)
Composite Criteria: Investment in Plant and
Machinery/Equipment and Annual Turnover
Classification Micro Small Medium
Investment in Investment in Investment in
Manufacturin P&M/Equipmen P&M/Equipmen P&M/Equipmen
g Enterprises t not more than t not more than t not more than
and INR 1 crore and INR 10 crores INR 50 crores &
Enterprises Annual and Annual Annual
rendering Turnover not Turnover not Turnover not
Services more than INR 5 more than INR more than INR
crores 50 crores 250 crores
The new classification of MSME's shall be effective from July 1,
2020. This new classification has been introduced by the Government to
boost businesses and put to rest the growing fear among MSMEs of
losing benefits granted under the MSME Act on account of outgrowing
the erstwhile thresholds of classification. While this is a welcome
initiative by the Government, various questions remain unanswered,
namely - what constitutes "plant and machinery", will the previous
guidelines on calculation of investment towards plant and machinery
still be applicable.
Further, it is pertinent to note that Finance Minister has clarified
that start-ups are eligible to avail relief measures announced for MSME
under the ABA. While start-ups are not explicitly covered under the
definition of MSMEs, start-ups operating and engaged in the
manufacturing and services sector may consider registering themselves
as an MSME on the Udyog Aadhar Portal (considering the revised
classification of MSMEs). By registering as a MSMEs, start-ups can avail
the various other benefits offered to MSMEs under the ABA. Official
notifications, in this regard are waited.
For More Details Contact Us:
Contact No. 9112211457
Email: help@[Link]
Website: [Link]
