Micro, Small and Medium Enterprises
- Micro, Small and Medium Enterprises have been defined under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.
- It was previously measured and classified in terms of the investment, which varied for the Manufacturing and the Service Sector.
- After the introduction of The Micro, Small and Medium Enterprises Development (Amendment) Bill, 2018 on 23 July 2018, the basis of classification has been changed from investment in plant and machinery to annual turnover.
- Also, the amendment defined the same slabs/annual turnover brackets of classification for both Manufacturing and Service units.
A. Classification of the Micro, Small and Medium Enterprises, in terms of investment (Previous/old Measure of Classification).
(a) For the enterprises that are engaged in the Manufacture or Production, Processing or Preservation of goods, classification based on investment in Plant and Machinery may be made as-
Manufacturing Enterprise | Investment in Plant and Machinery |
Micro enterprise | Investment does not exceed Rs. 25 lakh |
Small enterprise | investment is more than Rs. 25 lakh but does not exceed Rs. 5 crore |
Medium enterprise | Investment is more than Rs.5 crore but does not exceed Rs.10 crore. |
In these enterprises, the investment in plant and machinery is the original cost excluding land and building and the items, as specified by the Ministry of Small Scale Industries.
(b) For the enterprises, that are engaged in providing or rendering of Services, classification of the enterprises based on investment in Equipment is done as -
Service Sector Enterprise | Investment in Equipment |
Micro enterprise | Investment does not exceed Rs. 10 lakh |
Small enterprise | investment is more than Rs.10 lakh but does not exceed Rs. 2 crore |
Medium enterprise | Investment is more than Rs. 2 crore but does not exceed Rs. 5 crore |
B. Classification of the Micro, Small and Medium Enterprises, in terms of Annual Turnover (Latest/New Measure of Classification).
All Enterprises (Manufacturing + Service) | Annual Turnover |
Micro enterprise | Annual Turnover does not exceed Rs. 5 Crore |
Small enterprise | Annual Turnover is more than Rs.5 Crore but does not exceed Rs. 75 crore |
Medium enterprise | Annual Turnover is more than Rs. 75 crore but does not exceed Rs. 250 crore |
In addition to the above provisions, the bill also empowered the Central Government to vary the mentioned turnover limits through a notification, provided the limits are not exceeding thrice the limits already specified.
Highlights of MSMED Act -
- Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 was enacted on June 16, 2006.
- Micro, Small and Medium Enterprises Development Act, 2006 aimed to support economic recovery and sustained growth by encouraging a more diversified and efficient industrial structure. To achieve this objective, it is focused on these main areas, these are -
(i) strengthening competition by establishing an appropriate legal and regulatory framework and removing barriers to competition and trade.
(ii) facilitating investment and trade by strengthening the framework governing the policy, credit facilities, grants, administration and utilisation of funds, development of skill in the employees, management and entrepreneurs, provisioning for marketing assistance or infrastructure facilities and cluster development of such enterprises with a view to strengthening backward and forward linkages
(iii) developing a SME policy, regulatory and financing framework. - The Micro, Small and Medium Enterprises Development Act, 2006 has empowered the Central Government to establish a National Board for MSMEs with its head office at Delhi.
- Accordingly, the National Board for Micro, Small & Medium Enterprises (NBMSME) was established for the first time on 15th May 2007. It consisted of 47 members, including Chairman, Vice- Chairman and Member Secretary.
- The Minister in charge of Ministry of MSME is ex-officio Chairman of the National Board of MSME.
- Bank’s lending to the Micro and Small enterprises engaged in the manufacture or production of goods specified in the first schedule to the Industries (Development and Regulation) Act, 1951 and notified by the Government from time to time is reckoned for priority sector advances.
- The Micro, Small and Medium Enterprises Development (Amendment) Bill, 2018 on 23 July 2018 was introduced in Lok Sabha by Mr. Giriraj Singh, Minister of State for Micro, Small and Medium Enterprises.
- After the amendment, the basis of classification has been changed from investment in plant and machinery to annual turnover.
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