SME Times News Bureau | 08 Feb, 2018
Union Cabinet chaired on
approved change in the basis of classifying Micro, Small and Medium
enterprises from 'investment in plant & machinery/equipment' to 'annual
MSME ministry said that section 7 of the Micro, Small and Medium
Enterprises Development (MSMED) Act, 2006 will be amended to define
units producing goods and rendering services in terms of annual
the new definition, a
micro enterprise will be defined as a unit where the annual turnover
does not exceed five crore rupees; a
small enterprise will be defined as a unit where the annual turnover
is more than five crore rupees but does not exceed Rs 75 crore;
medium enterprise will be defined as a unit where the annual turnover
is more than seventy five crore rupees but does not exceed Rs 250
the Central Government may, by notification, vary turnover limits,
which shall not exceed thrice the limits specified in Section 7 of
the MSMED Act.
present the MSMED Act (Section 7) classifies the Micro, Small and
Medium Enterprises (MSMEs) on the basis of investment in plant and
machinery for manufacturing units, and investment in equipment for
criterion of investment in plant and machinery stipulates self
declaration which in turn entails verification if deemed necessary
and leads to transaction costs.
turnover as a criterion can be pegged with reliable figures available
e.g. in GST Network and other methods of ascertaining which will help
in having a non discretionary, transparent and objective criteria and
will eliminate the need for inspections, make the classification
system progressive and evolutionary, help in overcoming the
uncertainties associated with the classification based on investment
in plant & machinery/equipment and employment, and improve the
ease of doing business," the
ministry said in a statement.
addition the amendment will provide flexibility to the Government to
fine-tune the classification of MSMEs in response to changing
economic scenario without resorting to the amendment of MSMED (Micro,
Small & Medium Enterprises Development) Act.
change in the norms of classification will enhance the ease of doing
business. The consequent growth and will pave the way for
increased direct and indirect employment in the MSME sector of the
country," the MSME ministry said.