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Revised MSME Definitions
Finance Minister of India, Nirmala Sitharaman, announced the new and revised definitions of the Micro Small and Medium Enterprises. Before the new revised definitions, the MSME’s were defined in regard to the investment that was put in. The revised definition will define the MSME on the basis of turnover of the company as well.The Minister further stated that there shall be no difference between Manufacturing and Service MSMEs.
The Minister further explained that the MSMEs will now be known as Micro Units if the investment that they carry is upto Rs. 1 crore and the turnover is of less than Rs. 5 crore. The definition was changed from investment criteria to be Rs. 10 lakh for service MSMEs and Rs. 25 lakh for manufacturing.
Moreover, the definition of small units and medium units has also been changed. These changes have been made for the benefit of the MSMEs.It is pertinent to note that this change will try to remove the fear among various MSMEs that if they outgrow the defined size, it will result in losing all the benefits they had. To avail the entitled benefits, MSMEs restricted their growth and tried to remain within the confined definition given by the government.
With the modified definitions, the MSMEs will be encouraged to grow more that will not only benefit the enterprises but the economy at large.
There is an act which regulates the broad functioning of these enterprises, the Micro Small Medium Enterprise Development (MSMED) Act, 2006. The Act is divided into two classes namely the Manufacturing Enterprises and the Service Enterprises. The prior is defined in terms of the investment in plant and machinery and the latter is defined in regard to investment in equipment. The government did not wait to amend the Act, rather, used other provisions of law to include the new criteria and revised investment limits.
