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Last updated: 13 Feb, 2018  

msme-THMB-2010.jpg New MSME definition

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Bikky Khosla | 13 Feb, 2018

The Union Cabinet last week approved a proposal to change the definition of Micro, Small and Medium enterprises. Since 1950s Small Scale Industries (SSIs) and later MSMEs have been traditionally defined based on their investment in plant and machinery for manufacturing units, and investment in equipment for service enterprises, and now the new definition define them based on their annual turnover. This decision, which came on the heel of the Budgetary proposal to the reduce corporate tax to companies having turnover up to Rupee 250 crore, is a welcome one.

According to the new definition, a micro enterprise is a unit where the annual turnover does not exceed Rs. 5 crore, a small enterprise is one where annual turnover is between Rs. 5 crore and Rs 75 crore, and a medium enterprises is where the turnover is more than Rs 75 crore but does not exceed Rs 250 crore. In order to give this new MSME definition into effect, the Section 7 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 will be amended in the coming days.

The move also aligns the definition with GST regime. It will be easier now for authorities to verify claims of businesses using the sales data they have from the GST Network. This will eliminate the need for inspections, make the classification system progressive, and contribute to ease of doing business as well. It is also expected that with this new definition the Government will do away with those clauses that exclude medium sector from various promotional schemes for the sector.

Meanwhile, in another positive development, the RBI last week gave MSMEs an extension of up to 180 days to clear their loans to banks. Now, they shall continue to be classified as a standard asset in the books of banks and NBFCs subject to amount from the borrower overdue as on September 1, 2017 and payments from the borrower due between September 1, 2017 and January 31, 2018 are paid not later than 180 days from their respective original due dates. No doubt, this move will help MSMEs to adjust to the new formalised business environment under the GST.

I invite your opinions.

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manish shandasani | Sat Jun 9 12:31:06 2018
Dear sir, can you please tell me that new defination has been approved by govt.

Surinder Bajaj | Thu May 2 07:08:40 2019
Is the classification of medium industry still based on plant and machiney upto 10 crores or on turnover of 250 crores. Has the proposed bill passed by lok sabha become a law or not yet?

Surinder Bajaj | Thu May 2 07:10:16 2019
Is the classification of medium industry still based on plant and machiney upto 10 crores or on turnover of 250 crores. Has the proposed bill passed by lok sabha become a law or not yet?

MSME new definition
R.K.GUPTA | Fri Apr 20 03:43:21 2018
The definition based on turnover is a progressive step but the limit of turnover is too high and it appears that most of the companies which are now under Medium or Large will eat out the really small, micro industries. The turnover limit should not exceed more than 75 crore. It may be segregated as 25 Cr, 50 Crore and 75 Crore for MSME respectively.

Classification of MSEs
Bijoy B. Das | Wed Feb 21 10:43:24 2018
Kindly specify whether the classification is carried out on the basis of annual turnover or the setup cost involved in installation of plant and machinery.

Linking of various Other dept
Prashant | Fri Feb 16 13:37:27 2018
It is seen in the industry that various other dept - like Factory Inspector , Boiler Inspector, Pollution board , Banking system etc are linked as per the definition of the unit/ factory ... so when a industry is SSI based on investment in the plant and machinary it is getting various benefit in fees, inspection , etc.... so what will happen to that under the new MSME rule ammedment to done in the budget 2018. whether they will be also changes in each dept. secondly - what happens to industry which are registered under SSI and have a turnover of beyond 5-10Cr ... whether they also have to register under MSME ? lastly, whether any time frame is given for the conversion incase it is mentioned compulsory to change from SSI to MSME.

j r lobo | Thu Feb 15 09:37:47 2018
Rs,5 Cr turnover limit is substantial. Since investment on plant & machinery is lifted. It is beneficial to industry.

regarding gov.Help for an MSME unit
Rosamma John ,M/S Albertel technologies, Ernakulam Kerala | Thu Feb 15 09:25:38 2018
Sir ,My firm is an existing firm under lady proprietorship ,our turn over is 40 - 60 lakhs only .But still we are ( with 8 staffs ) working in rented building .Do you have any proposal to make an own building with the help of your any scheme .If we are getting fund for Land and building that will be a better chance to grow more and fast

Prakkash | Thu Feb 15 08:24:15 2018
Micro enterprise which are supporting to mediem and large enterprises are afected i think needs to be more clear and supporting GST guidelines for micro enterprises.

Extention 180 days to clear loans to banks
Prithvi Raj Bhandari-(CMD) | Thu Feb 15 04:48:42 2018
Banks still dont have soft corner for industries and regularly pressing to clear loans.We M/S Bhandari Engg Co.Pvt.Ltd Bathinda had adhoc loan of Rs.50 lacs for 3 months in addition to our cc limit because to the great fall of sales on 10th December2017 to meet the regular requirement as Punjab Govt payments are very late and irregular.But till date punjab Govt payments are in worst condition.We requested HDFC Bank for extention till further 3 months but they denied and stopped transation in our account since 10th feb,2017.We are put in considerable inconvenience.We feel if bank will not support who else will come forward.Bank always see how much sale is up but they dont realise the actual market condition.If Govt can help us by advising for soft corner for msme it will be great help otherwise we are at the edge of devastation. Since last year business is not picking up due to certain changes and Govt decisions.Now we feel a better future as everything is settled.Please advise the concerned HDFC Bank HO CHD to help us by giving extention for another 3 months and oblidge.

  Re: Extention 180 days to clear loans to banks
R.K.GUPTA | Fri Apr 20 03:49:01 2018
This is the difference between public sector and private sector. In case of genuine requirements, Public Sector banks come forward as a Corporate loan against the bills of the state Government. In case, you want to have complete knowledge of working capital, you may buy a book "Working Capital Management & Finance" By R.K.GUPTA & hIMANSHU Gupta from directly from the store of publisher It will cost you only Rs 419 50/- Or else you can place an order at where you may get it for Rs 350/- including postage charges.

new definition
D.Sukumaran | Thu Feb 15 04:29:37 2018
Does this apply for service providers also-?

Start-Up Fund
Basheer | Thu Feb 15 02:52:37 2018
How this amendment help to get capital Fund for new start-up.

Rajesh Kumar | Thu Feb 15 01:00:35 2018
Positive approach of government.

MSME Loan for Startup
Krishnamurthy | Thu Feb 15 00:33:22 2018
Please let me know the formalities for MSME Loan for Startup.Whats the eligibility amount of loan for manufacturing in Printing & PACKAGING industry.Please let me know the Details.Agents are Exploiting in the Market.

New MSME definition - easy loan required
Sujay Bhattacharya | Wed Feb 14 22:06:01 2018
Many Micro & Small enterprises still do not have access to Bank loan. So, they are forced to borrow money from elsewhere at higher interest rates. On the other hand they contribute substantially to earn foreign currency via export. Therefore, it is important to provide them easy interest rate loan facility through organized Banking or non-Banking financial institutes as MSEs provide a huge number of employments in the manufacturing sector.

Protect MSME from Cheaters and Frauders.
DHEERENDER KUMAR | Wed Feb 14 16:10:07 2018
Why the present Govt has not made any strict law to punish enterprise owner within 3 or 4 months enterprises if their payment thru cheque gets bounced. There must be strict time frame maximum 3 or 4 months for any legal case disposal and very Strict punishment of minimum 5 years imprisonment. This way the Cash flow of MSME can be protected. We are facing very very tight ir rather say on verge of closure due to severe Cash flow issue due similar case under section 138.

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