MSMEs to be decided based on turnover

 

The Micro, Small and Medium Enterprises growth (Amendment) Bill provides for change in the standard of classification of MSMEs from the existing based on ‘investment in plant and machinery or equipment’ to ‘annual turnover‘ of the enterprise.

• The Micro, Small and Medium Enterprises Amendment) Bill, was introduced  by the Minister of State for Micro, Small and Medium Enterprises, The Bill compensation the Micro, Small and Medium Enterprises Development Act, 2006.  The Act classifies and regulates enterprises as micro, small and medium enterprises.
• The Act classifies micro, small and medium enterprises (MSMEs) on the basis of investment in: (i) plant and machinery, for enterprises engaged in the manufacturing or production of goods, and (ii) equipment, for enterprises providing services.
• The Bill introduces a uniform classification for all MSMEs.  Under the Bill, all MSMEs, whether they are manufacturing or service-providing enterprises will be classified on the basis of their annual turnover.

 Classification of enterprises as micro, small and medium enterprises (in Rs)

Type of Enterprise	2006 Act		Bill
	Manufacturing	Services	All enterprises
	Investment in Plant and Machinery	Investment in Equipment	Annual Turnover
Micro	25 lake	10 lake	5 crore
Small	25 lake to 5 crore	10 lake to 2 crore	5 to 75 crore
Medium	5 to 10 crore	2 to 5 crore	75 to 250 crore

• Under the Act, the central government may classify micro, tiny or village enterprises as small enterprises. The Bill seeks to enlarge this to allow the classification of micro, tiny or village enterprises as small as well as medium enterprises.

• Due to the classification, the government had to incur expenses to physically verify the actual assets and chart up the actual investment made.
• Now, the government passed a new bill, which classifies the MSMEs based in its annual turnover instead of investment.
• The revised basis for classification of MSMEs based on turnover has made it easier for the government and the industries to recognize a business as an MSME.
• The government can look up in the GST database to match the actual turnover cited by an organisation and accordingly classify it into MSME category.