Union government’s new definition of micro, small and medium enterprises (MSMEs) will come into effect from July 1, 2020, a statement issued by the MSME ministry stated on Wednesday.
“The Union Ministry of Micro, Small and Medium Enterprises has issued a gazette notification to pave the way for 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 announcement comes two days after the Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, approved the revision of MSME definition. 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.
Other than this, manufacturing and services unit with Rs 1 crore of investment and Rs. 5 crore of turnover will be classified as ‘micro’ whereas a unit involving Rs 10 crore of investment and Rs 50 crore of turnover will be categorised as a ‘small’ enterprise.
Ministry officials said that the new definition will pave way for strengthening and growth of MSMEs. Particularly, the provision of excluding the exports from 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 existing criterion of 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, 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.
MSMEs contribute 29 per cent to India’s gross domestic product and comprise almost half of its exports. These units employ over 11 crore workers.