Union Ministry of Micro, Small and Medium Enterprises has issued gazette notification to pave way for implementation of the upward revision in the definition and criteria of MSMEs in the country. The new definition and criterion will come into effect from July 1, a government release has said.
After 14 years since the MSME Development Act came into existence in 2006, a revision in MSME definition was announced in the Atmanirbhar Bharat package on May 13. As per the announcement, the definition of micro manufacturing and services units was increased to Rs 10 million of investment and Rs 50 million of turnover. The limit of small unit was increased to Rs 100 million of investment and Rs 500 million of turnover. Similarly, the limit of medium unit was increased to Rs 200 million of investment and Rs 1 billion of turnover. The government on June 1 decided for further upward revision of the MSME definition. For medium Enterprises, now it will be Rs 500 million of investment and Rs 2.5 billion of turnover.
The existing criterion of definition of MSMEs is based on the MSMED Act, 2006. It was different for manufacturing and services units. It was also very low in terms of financial limits. Since then, the economy has undergone significant changes. After the package announced on May 13, there were several representations saying that the announced revision is still not in line with market and price conditions and hence it should be further revised upwardly. Keeping in mind these representations, the Prime Minister decided to further increase the limit for medium units. This has been done in order to be realistic with time and to establish an objective system of classification and to provide ease of doing business.
Also, a new composite formula of classification for manufacturing and service units has been notified. Now, there will be no difference between manufacturing and service sectors. Also, a new criterion of turnover is added.
Ministry officials said that the new definition will pave way for strengthening and growth of the MSMEs. Particularly, the provision of excluding the exports from counting of turnover will encourage the MSMEs to export more and more without fearing of losing the benefits of an MSME unit. This is expected to exponentially add to exports from the country leading to more growth and economic activity and creation of jobs.
Detailed guidelines and clarifications concerning the classification in pursuance of the changed definition are being issued separately by the Ministry of MSME.
The ministry has reiterated that it has put in place a very strong handholding mechanism for MSMEs and new entrepreneurs in the name of Champions that was recently launched by the Prime Minister. Interested enterprises or persons can take benefit of this mechanism and can also put their queries or complaints. The same will be attended to with utmost promptness.