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Micro, small and medium enterprises (MSMEs) will soon be defined based on their annual turnover if a new Bill introduced in the Lok Sabha on Monday is cleared. At present, it is decided based on the investment made in plant and machinery/equipment.
Under the MSME Development (Amendment) Bill, 2018, introduced by MSME Minister Giriraj Singh, any business with a turnover of up to ₹5 crore will be considered a ‘micro enterprise’. The other slabs are ₹5-75 crore for ‘small enterprise’ and ₹75-250 crore for ‘medium enterprise.’
At present, there are two sets of definitions, depending on whether the units produce goods or services. Under the goods category, the slabs are up to ₹25 lakh for micro, ₹25 lakh to ₹5 crore for small and ₹5-10 crore for medium. In the case of services, the slabs are: up to ₹10 lakh , ₹10 lakh to ₹2 crore and ₹2-5 crore.
“It has been felt necessary to change the criteria for the classification in order to align it with the needs of current times and changing business ecosystem,” said the Bill’s statement of objects and reasons.
The statement also said the criterion of investment entails physical verification, bringing with it transaction costs. It also incentivises promoters to keep the investment size small to retain the MSME tag.
On the other hand, if the annual turnover is the criterion, the information available with the GSTN Network and other sources can be used.
“Overall, the turnover based classification will promote the ease of doing business and will put in place a non-discretionary, transparent and objective classification system,” the statement said.
The number of MSMEs registered on Udyog Aadhaar Memorandum (UAM) Portal till July 12, 2018 (since September 2015) is 48.40 lakh. However, as per the data received from the 73rd round of the National Sample Survey on ‘Unincorporated Non-Agricultural Enterprises (excluding Construction)’, conducted by National Sample Survey Office (NSSO), Ministry of Statistics & Programme Implementation (during July 2015 to June 2016), the total number of MSMEs in the country was 633.88 lakh
India’s export of products from the MSMEs increased to $137.1 billion in 2016-17 from $130.8 billion in 2015-16, registering a growth of 4.8 per cent, which was an improvement from the negative growth of 5.9 per cent in 2015-16.
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