Threshold for MSME Classification revised

In a move which will be vastly beneficial to India’ Micro, Small and Medium Enterprises, the Government has raised the threshold levels for classification of the same which shall enable more businesses to be classified as MSMEs and take the benefit of the same.

Existing and Revised Definition of MSMEs

                                                                Existing MSME Classification
Criteria: Investment in Plant and Machinery and Equipment
ClassificationMicroSmall Medium
Mfg. EnterprisesInvestment < Rs. 25 lakhsInvestment < Rs. 5 CroresInvestment < Rs. 10 Crores
Services EnterprisesInvestment < Rs. 10 LakhsInvestment < Rs. 2 CroresInvestment < Rs. 5 Crores

 

                                                                   Revised MSME Classification
Composite Criteria: Investment and Annual Turnover
ClassificationMicroSmall Medium
Mfg. Enterprises

And

Services Enterprises

 

Investment < Rs. 1 Crores

And

Turnover < Rs. 5 Crores

Investment < Rs. 10 Crores

And

Turnover < Rs. 50 Crores

Investment < Rs. 50 Crores

And

Turnover < Rs. 250 Crores

 

Note: However, the criteria for medium enterprises is further proposed to be raised to Rs. 50 Crores investment and Rs. 250 Crores Turnover.

 

Some of the takeaways from this change in classification are also as follows:

  1. The only criteria earlier was investment in plant and machinery (for manufacturing sector) and investment in Equipment for Services sector. Now this has been removed and a twin criteria has been established.
  2. Difference between manufacturing and Service Sector has been removed. The earlier difference was not completely illogical since both have completely difference characteristics. However, this step will lead to simplification and also more service entities can take benefits of being MSME.
  3. Again pure trading firms (i.e. those firms not involved in manufacturing or service activities) have lost out. This reclassification was an opportunity to include trading entities as MSME units but the same has not happened. Trading units also contribute to the supply chain and employment opportunities. Small trading units would have also benefited from early payments protection and cheaper loans.

 

Government has many programs to help MSMEs and with this wider classification, it is expected that more and more MSMEs would benefit. MSMEs should immediately register themselves as MSMEs to take benefit of the same.

 

Article by CA Bhavesh Savla