The Ministry of Micro, Small & Medium Enterprises on Wednesday said that from July 1, New Classification of MSMEs based on new Criteria across approved by the government.
As per the revised criteria, a unit with Rs 50 crore of investment and Rs 250 crore of turnover will fall under the ‘medium’ enterprise category.
The revision in MSME definition was announced in the Atmnirbhar Bharat package on May 13, 2020, by Finance Minister Nirmala Sitharaman.
The definition of Micromanufacturing and services units was increased to Rs 1 Crore of investment and Rs 5 Crore of turnover.
The limit of the small units was increased to Rs 10 Crore of investment and Rs 50 Crore of turnover. Similarly, the limit of the medium unit was increased to Rs 20 Crore of investment and Rs 100 Crore of turnover.
However, the Government on June 1 decided for further upward revision of the MSME Definition. For medium Enterprises, now it will be Rs 50 Crore of investment and Rs 250 Crore of turnover.
Also, a new composite formula of classification for manufacturing and services units has been notified. Now, there will be no difference between the manufacturing and service sectors.
Ministry officials said that the new definition will pave way for strengthening and growth of MSMEs. Particularly, the provision of excluding the exports from the counting of turnover will encourage the MSMEs to export more and more without fearing to lose 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,” an official statement said.
The Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi cleared the upward revision of the definition of micro, small and medium enterprises (MSMEs) on Monday.
“The Union Ministry of Micro, Small and Medium Enterprises has issued a gazette notification to pave the way for the 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 1 July 2020,” the statement said.
The existing criterion of the 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 13 May 2020, 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,” the statement said.
MSMEs contribute 29 percent to India’s gross domestic product and comprise almost half of its exports. These units employ over 11 crore workers.