Government works on new MSME definition based on turnover
Oct 30, 2019
The Union Government is working on a new definition for micro, small, and medium enterprises linked to turnover instead of capital deployed in plant and machinery which could allow more businesses to make use of government incentives.
The government plans to amend the Micro, Small & Medium Enterprises Development Act to allow it to change the definition of a MSME to one based on its turnover, TNN reported. This move could allow more businesses to register as MSMEs and be eligible for certain government schemes. The Union Government has been promoting the MSME sector and believes that it will lead the next phase of India’s economic growth.
"The new definition will be more realistic given that the current investment-based classification was decided when the MSME Development Act was enacted 13 years ago,” a source told TNN. “Often, Indian MSMEs are too small to be able to benefit from economies of scale."
The new government proposal would classify a MSME as a business with annual turnover up to Rs 5 crore ($752,000) and businesses with up to Rs 75 crore annual turnover as a “small unit”. Businesses with up to Rs 250 crore in annual revenue would be classed as “medium scale” businesses.
The MSME Ministry is currently finalising the proposal. As many handicraft, artisan, textiles, and fashion businesses’ revenue amounts to Rs 5 crore or under a year, the proposed definition could have a bearing on how such businesses are classified.
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