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MSME

MSMEs new definition and criterion to come into effect from July 1

An upward revision The Cabinet Committee on Economic Affairs (CCEA) led by PM Narendra Modi have cleared to pave the way for implementation of the upward revision in the definition and criteria of micro, small and medium enterprises (MSMEs) in the country.

  • Importance of MSMEs on Indian economy
  • MSMEs contribute nearly 30% to Gross Domestic Product (GDP) and comprise almost half of its exports. These units employ over 11 crore workers.
  • The revision in MSME definition was announced in the Atmanirbhar Bharat package on May 13, 2020 by Finance Minister Nirmala Sitharaman.
  • The new definition and criterion will come into effect from 1 July, 2020,” the official statement said.
  • The existing criterion of definition of MSMEs is based on the MSMED Act, 2006.

 

‘Medium’ enterprise category

More than 6 crore micro, small and medium enterprises (MSMEs) across the country will be classified on the basis of the new criteria approved by the government.

According to the revised criteria, the limit of “medium” unit was increased to Rs 50 crore of investment and Rs 250 crore of turnover.  will fall under the ‘medium‘ enterprise category. The existing criterion of definition of MSMEs is based on the MSMED Act, 2006.

 

‘Micro’ and ‘small’ enterprise category

Similarly, the limit of medium unit was increased to Rs 20 Crore of investment and Rs 100 Crore of turnover. And a unit involving Rs 10 crore of investment and Rs 50 crore of turnover will be categorised as a ‘small‘ enterprise.

 

How is it different from previous classification?

A new composite formula of classification for manufacturing and services units has been laid out. With the new classification, there will be no difference between the manufacturing and service sectors. Also, a new criterion of turnover is added.

Previously, it was different for manufacturing and services units. It was also very low in terms of financial limits.

The Ministry officials have said that the new definition will pave way for strengthening and growth of the MSMEs.

Particularly, the provision of excluding the exports from counting of turnover will encourage the MSMEs to export more and more without fearing to loose the benefits of a MSME unit. This is expected to exponentially add to exports from the country leading to more growth and economic activity and creation of jobs.