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NEW MSME DEFINITION WITHOUT AMENDING LAWS

Why in news?

The definition of Micro, Small and Medium Enterprises (MSMEs) was redefined on the basis of investment limit and turnover size.

What has changed in the Definition of MSMEs?

  • Earlier, the MSMEs were defined on the basis of investments put in, now the revised definitions will also include turnover of the company.
  • There will be no more distinction between Manufacturing and Service MSMEs.

Details

Revision of MSMEs Redefined

Micro Units

  • MSMEs will now be called Micro units if they have investments upto Rs 1 crore and turnover of less than Rs 5 crore.
  • The definition earlier was on investment criteria of up to Rs 10 lakh for Service MSMEs earlier and Rs 25 lakh or manufacturing.

Small Units

  • For an MSME to be defined as a Small unit, its investment limit has been raised from Rs 5 crore to Rs 10 crore with a turnover of less than 50 crore.
  • This applies to all MSMEs including the Service enterprises which earlier came under investment of up to Rs 2 crore.

Medium Units

  • Enterprises with investments up to Rs 20 crore with a turnover of less than Rs 100 crore will now be called Medium units.
  • Earlier, the investment limit for Medium units was up to Rs 10 crore and Service enterprises up to Rs 5 crore.

Why was such a change needed?

  • The definition being changed is done in the favour of MSMEs.
  • There are around 6.3 crore MSME units in the country, with over 99% categorised as small units.
  • There has always been this fear, among successful MSMEs also, that if they outgrow the size of what has been defined as an MSME, they will lose their entitled benefits.
  • This is why MSMEs like to remain within the definition rather than grow.
  • With the revised definitions of MSMEs, they will not have to worry about growing their size and can still avail benefits.
  • The criticisms against the move to define MSMEs based on Turnover is that, it will not be in the interest of manufacturers but instead it will benefit assemblers.

-Source: Times of India

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October 2022
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