- GoI has approved a proposal to redefine micro, small and medium enterprises, or MSMEs, based on their annual revenue.
What does this mean?
- The current definition of MSME relies on self-declared investment on plant and machinery.
- Manufacturers with Rs.25 lakh investment in plant and machinery were termed micro enterprises and those with investments between Rs.25 lakh and Rs.5 crore were regarded as small enterprises. Firms with investments of up to Rs.10 crore are classified as medium.
- As per the new definition, businesses with revenue of as much as Rs.5 crore will be called a micro enterprise, those with sales between Rs.5 crore and Rs.75 crore will be deemed as small and those with revenue between Rs.75 crore and Rs.250 crore will be classified as medium-sized enterprises.
It is expected that:
- This will improve ease of doing business,
- Avoid unnecessary inspections,
- Enable the authorities to verify claims of businesses using the sales data they have from the GST Network, the company that processes goods and services tax (GST) returns.
Other steps for MSME
- A cut in corporate tax from 30% to 25% has been announced in the Union budget for entities with sales of up to Rs.250 crore.
- The central bank has raised the repayment period before MSME loans are classified as bad loans from 90 days to 180 days.
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What experts have to say
- The new norms will remove the ambiguity about investments in plant and machinery. The definition based on turnover is more rational and objective.
- The maximum turnover limit of Rs.250 crore is on the higher side and may allow larger companies to corner benefits meant for MSMEs. A maximum turnover limit of Rs.50 crore could have really helped the smaller companies to get the benefits meant for MSMEs.