Bikky Khosla | 24 Dec, 2019
The Micro, Small and
Medium Enterprise (MSME) sector needs a new definition, an industry chamber viewed
last week. It added that the sector is critical in employment generation and
poverty reduction. MSMEs can play a key role also in slowing rural-urban
migration. This view sound convincing. There has been a long-standing demand
that the decade-old definition of MSMEs needs to be changed to meet the
changing needs of time.
year, the Union Cabinet approved a proposal to change the
definition of Micro, Small and Medium enterprises. Since 1950s Small Scale
Industries (SSIs), and later renamed as MSMEs since the year 2006, have been
traditionally defined based on their investment in plant and machinery for
manufacturing units, and investment in equipment for service enterprises, but
the proposed definition defines them based on their annual turnover.
to the proposed 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 effect, the Section 7 of the Micro,
Small and Medium Enterprises Development (MSMED) Act, 2006 needs be amended.
industry body is of the opinion that the proposed definition will
help in directing the benefits of economic growth to the intended beneficiaries.
It is also noteworthy that such a change will align the definition with GST
regime, making it far easier for authorities to verify claims of businesses
using the sales data they have from the GST Network. The needs of inspection
will be eliminated and thus ease of doing business for MSMEs will get a boost.