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Nov 06, 2019
New definition of MSMEs will be based on turnover

The new definition of Micro Small and Medium Enterprises (MSMEs) will be linked to turnover and do away with the current system of classifying units based on the capital deployed in plant and machinery.

According to media reports, the MSME ministry which is finalizing the proposal, is seeking to end the difference between the manufacturing and services sector that the current investment-based definition makes.

As per the proposal, any unit with a turnover of up to Rs. 5 crore will be classified as a micro enterprise, while those with up to Rs. 75 crore annual revenue will be in the small category unit. Similarly, enterprises with turnover of up to Rs. 250 crore will be classified as medium-scale enterprises.

Earlier this month, Union minister for MSME, Nitin Gadkari had said that the government will soon change MSMEs' definition.

The new definition is likely to be effected through an amendment to the MSME Act and may lead to further improvement in India's ease of doing business scenario.

Finance Minister Nirmala Sitharaman had also said in August the government would consider amending the MSME Act to move towards a single definition.

In February last year, the Union Cabinet had approved amendments to the law to change the criteria for classifying MSMEs from 'investment in plant and machinery' to 'annual turnover'.

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