The Government has revised the definition of MSMEs under its newly announced Atmanirbhar Bharat Special economic & comprehensive relief package of ₹20 lakh crores.
The Honourable Finance Minister Smt. Nirmala Sitharaman has given the details of this economic revival package. Numerous reliefs are announced for the small MSME businesses. Very importantly, the classification of MSMEs has now been revised.
New Definition of MSMEs
Right now, the low threshold limit in the MSMEs definition has caused MSMEs to fear that they’ll remain out of the govt benefits. This discourages them to grow further. Hence, the MSME definition shall be revised, by raising the Investment limit and the threshold limit for turnover.
Here we have shown the existing definition of MSMEs and the new definition of MSMEs in tabular form:
Existing MSME Classification
Criteria: Investment in Plant & Machinery or Equipment
|Manufacturers||Investment < ₹ 25 lakh||Investment < ₹ 5 crore||Investment < ₹ 10 crore|
|Service providers||Investment < ₹ 10 lakh||Investment < ₹ 2 crore||Investment < ₹ 5 crore|
New MSME Classification
Composite Criteria: Investment & Annual Turnover
|Manufacturers & Service providers||
Investment < ₹ 1 crore
Turnover < ₹ 5 crore
|Investment < ₹ 10 crore
Turnover < ₹ 50 crore
Investment < ₹ 20 crore
Turnover < ₹ 200 crore
The MSME business must possess the Udyog Aadhaar certificate aka MSME registration to avail benefits of the government reliefs.
However, there are 2 uncertainties in the new MSME definition:- One is regarding the meaning of investment, and the other is the period for annual turnover.
- Criteria for investment
As per the existing definition of MSME, the definition of investment includes the investment in Plant & Machinery/Equipment. The Ministry of Small Scale Industries vide its notification No.S.O.1722(E) dated October 5, 2006, specified-
In the case of the above enterprises, investment in plant and machinery is the original cost excluding land and building and the items.
The government has not clearly specified the new criteria of investment for MSMEs.
- Period for Annual Turnover
The government has not clarified regarding the period to be considered for annual turnover. There is a doubt as to whether the annual turnover of the preceding financial year shall be considered or the current year. Suppose the current year’s annual turnover is taken into account of a newly formed MSME, the income from April to May shall only be ascertained, which is not annual income.
The government must clarify these 2 crucial aspects in the definition of MSME.
If you require any other guidance with respect to Udyog Aadhaar MSME registration, please feel free to contact our business advisors at 8881-069-069.