Revised Proposed Definition of MSME Business in India

The Union Cabinet have agreed to change the Definition of MSME Business in India. This step was taken to coordinate the definition of MSME with the GST Establishment, as it will be straightforward for authorities to verify the claims of business using the sales data of GST. This Step is also expected to increase the ease of doing Business in India and will help in avoiding unnecessary inspection of MSME Business, as this move will help in introducing a non-discretionary, transparent and objective classification system. Also, this step is necessary to ensure that MSME Sector is aligned properly with the needs of current times and Changing Business Ecosystem.

What was The Earlier Definition of Indian MSME Business?

Earlier, the MSME Business was defined based on the investment in Plant and Machinery. Under this definition the business that have investment of INR 25 lakh in plant and machinery came under the category of Micro Enterprises, enterprises with investment in plant and machinery between INR 25 lakh and 5 cores came in the category of Small Enterprises and enterprise that have investment in plant and machinery up to INR 10 Crore came under the category of Medium Enterprise.

What Is the New Definition of MSME Business In India?

In the new definition of MSME business, the business that have revenue does not exceed INR 5 Cr will be known as known as Micro Enterprise, the enterprises with the sales between INR 5 crore and INR 75 crore will come under the category of Small Enterprise and the enterprises with revenue between INR 75 crore and INR 250 crore will come under the category of Medium Enterprises.

What will be the benefit of New Definition of MSME Business In India?

• The first benefit that adapting a new definition for MSME Business is that it will make the classification system of MSME very transparent, liberal and transformative as taking turnover as a criteria for ascertaining New GST Registration (myonlineca[dot]in/gst-registration[dot]html). In GST Network will make reliable figure available that will eliminate the need of Inspection.
• The second benefit will be that it will increase consequent growth of MSME and will make way for expanded Growth in Direct and Indirect Employment in MSME Business in India.
• The third benefit that an MSME Business will get is that new definition will remove the clauses that used to exclude MSME Enterprises from getting benefits of the Promotional schemes for Development of MSME Sector in India.

Conclusion for Revised Proposed Definition of MSME Business in India

I would like to point out to you that the number of MSME registered on Udyog Aadhar (myudyogaadhar[dot]org) till July 12, 2018 is 48.40 lakh, also the export of MSME manufactured products from India has increased to $137.1 billion in 2016-17 from $130.8 billion in 2015-16. So Changing the Definition of MSME Business in India is Expected to be one of the positive move taken towards enhancing growth of the MSME sector in the Country. With taking Turnover as criteria to define MSME Business will help in decreasing some degree of GST Tax Burden on MSME Business and will help it to get some perks from the Government of India.

Image credit- Canva