Starting from July, Micro, Small, and Medium Enterprises (MSMEs) are going to be classified under revised criteria. Cabinet Committee on Economic Affairs (CCEA) chaired by the Prime Minister gave the green light to the upward revision of the definition of MSME. The move is expected to encourage MSMEs to increase export without losing the status of an MSME and the benefits available. The distinction between manufacturing and services unit has also been removed and the same formula will apply to both segments.
As per the current MSMED Act 2006, an enterprise with an investment of less than Rs 25 lakh falls under the category of a Micro enterprise. According to the new rule, a manufacturing and services unit with Rs 1 crore investment and a
turnover of Rs 5 crore will be classified as ‘Micro’. A small enterprise till date is one which makes an investment of more than Rs 25 lakh but not exceeding Rs 5 crore. This has been changed to Rs 10 crore of investment and Rs 50 crore of turnover. Enterprises that make an investment of more than Rs 5 crore but not exceeding Rs 10 crore are today termed as Medium enterprises. This criterion has been revised to Rs 50 crore of investment and Rs 250 crore of turnover.
As an attempt to boost the growth of MSMEs, exports have been excluded from the reckoning of turnover and will not be factored in while calculating the turnover of an MSME. The step is bound to egg MSMEs on to augment their export capacity sans having to let go of the benefits availed by MSMEs. “This is expected to exponentially increase the exports from the country, leading to further growth in economic activity and creation of jobs,” said the official statement from the committee. “The Union Ministry of Micro, Small, and Medium Enterprises has issued a gazette notification to pave the way for implementation of the upward revision in the definition and criteria of MSMEs in the country. The new definition and criterion will come into effect from July 1, 2020,” the statement said.
Experts from the industry had raised concerns regarding the stimulus package, pointing out that the current provisions were not in line with existing market and price conditions, and that it needed to be revised upwardly. The statement from the committee said that the representations were deliberated over and the Prime Minister decided to increase the limit in order to establish an objective system of classification and increase the ease of doing business.
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