The Government has freed the Micro, Small and Medium Enterprises (MSME) sector from ‘inspector raj’, said minister for the sector Giriraj Singh on Thursday.

Addressing a group of reporters in New Delhi, Singh said, "We have rescued the MSME sector from 'inspector raj'. This change in classification will improve the ease of doing business and bring erstwhile MSMEs in the formal sector."

On change of MSME definition based on annual turnover of units, he said the classification will also help in skill development and promote start-ups.

The Union Cabinet on Wednesday approved the change in the definition of MSMEs according to which the enterprises with an annual turnover not exceeding Rs five crore will fall under "micro" enterprises.

"This will encourage ease of doing business, make the norms of classification growth oriented and align them to the new tax regime revolving around GST (Goods and Services Tax)," the government said.

Finance Minister Arun Jaitley, in his Budget presentation on February 1, had also announced relief for boosting the MSME sector -- the largest employer in the country -- by reducing the corporate taxation rate to 25 per cent for companies with turnovers of up to Rs 250 crore.