The Micro, Small & Medium Enterprises (MSMEs) are defined in India under the MSMED Act 2006 on the basis of capital investment made in plant and machinery, excluding investments in land and building.

BASIS MICRO SMALL MEDIUM
Manufacturing Sector Rs.2.5 Million Rs.2.5 Million to Rs.50 Million Rs.50 Million to Rs.100 Million
Service Sector Rs.1.0 Million Rs.1.0 Million to Rs.20 Million Rs.20 Million to Rs.50 Million

There is now a proposal to redefine the MSME according to turnover instead of capital investment; it also does away with the difference between Manufacturing and Service Sector:

BASIS MICRO SMALL MEDIUM
Manufacturing Sector & Service Sector Rs.50.0 Million Rs.750.0 Million Rs.2.50 Billion

Advantage:

  • The limits were set in 2006. After 12 years, adjusting for inflation would have required,
  • Modernisation of plants for delivery to certain sector requires large investment but have low turnovers, thus robbing them of MSME benefits,
  • Uneven playing field between older players and new entrants,
  • Authorities can cross check the turnover through platforms such as GSTN.

This is a welcome change and will need Parliament’s approval.

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