MSME DEFINITION- LATEST UPDATE

MSME DEFINITION- LATEST UPDATE

Now, an entity whose investments will be up to Rs. 50 crore and turnover up to Rs. 250 crores will be defined as Medium Enterprise

NEW DEFINITION OF MSME
 

On 01st June, 2020, the Cabinet Committee on Economic Affairs (CCEA) chaired by the Prime Minister of India, has revised the proposed definition of MSME
 

Earlier, the Finance Minister of India while addressing and announcing the Atmanirbhar Bharat package has proposed a new definition of MSME in order to revive the sector.
 

But now that proposed definition has been revised by the government on June 1st, 2020. The revised definition of MSME has been notified by the Ministry of Micro, Small and Medium Enterprises.
 

This new definition will come into effect from 01st July, 2020. 

As per the new definition, an entity whose investments will be up to Rs. 50 crore and turnover up to Rs. 250 crores will be defined as Medium Enterprise.
 

Definition of Revised MSME (applicable from 01st July, 2020)
 

Classification

Micro

Small

Medium

Manufacturing and Service Enterprises

where the investment in Plant and Machinery or Equipment does not exceed one crore rupees and turnover does not exceed five crore rupees;

where the investment in Plant and Machinery or Equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees;

where the investment in Plant and Machinery or Equipment not exceeding fifty crore rupees and turnover not exceeding two hundred and fifty crore rupees

 

 The following existing definition of MSME will be effective till June 30, 2020
 
Criteria: Investment in Plant& Machinery or Equipment
 

Classification

Micro

Small

Medium

Manufacturing

Investment<Rs.25 lac

Investment<Rs.5 cr.

Investment<Rs. 10cr.

Service Enterprises

Investment<Rs.10 lac

Investment<Rs. 2cr.

Investment<Rs.5 cr.

The difference between manufacturing and services enterprises has been eliminated earlier by the Finance Minister while announcing the Atmanirbhar Bharat package.
 

Key highlights of the CCEA’s decision on MSME
  • Entities with Rs 50 crore of investment in plant and machinery or equipment and Rs 250 crore of turnover will be defined as medium enterprise.
     
  • The definition of Micro and Small enterprises will be same as proposed by the Finance Minister.
     
  • The export turnover will not be included in the definition of MSME.
     
  • The cabinet has also approved the proposal for provisioning of Rs 20,000 crore as subordinate debt to provide equity support to stressed MSMEs. This move will benefit 200,000 stressed units.
     
  • The government also approved the proposal for equity infusion of Rs 50,000 crore for MSMEs through a fund of funds. This will help MSMEs in managing the debt-equity ratio and in their growth. This will also help the MSME’s to get listed on the stock exchange.
     
What the industry expert says?

The change in definition of MSME by the government has received mixed reaction from the industry houses. The Federation of Indian Micro and Small and Medium Enterprises (FISME) has praised the move of the government for enhancing the limit of investment and turnover in the definition of Medium Enterprises. But opposite to this, some experts from different sectors has expressed their disapproval regarding the change in definition of MSME.

They are worried that addition of extra firms in the MSME category will wipe out the real small-scale manufacturers and will weaken their chances of availing concessional loans and benefits under various government schemes.
 

Conclusion

MSME’s contribution is huge in the nation’s economic growth. Let’s hope that all these benefits provided by the Government in order to revive the MSME sector actually works. 
 

Edited by Minu Mishra

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