Why Ministry of MSME Changed the Definition of MSME?

The Government of India has changed the definition of MSME. In this article we will give you a detailed guide on what are MSMEs, older definition of MSME, new definition of MSME and Benefits on change in definition.

What are MSMEs?

The Micro Small and Medium Enterprises ( MSME) sector has a critical role in the economy in a country like India with a population size of about 1.3 billion. Though India is still facing many challenges like infrastructural problems, lack of proper market linkages etc, it has seen a tremendous growth in this sector. It is considered as the job creator and plays a very important role in providing large-scale employment opportunities and works in the favor of industrialization for rural and backward areas.

The concept of Micro Small and Medium Enterprise (MSME) was introduced by the Government of India. MSMEs are organizations engaged in the export, manufacture , distribution or storage of products and services according to the Micro Small & Medium Enterprises Growth (MSMED) Act 2006 . The main advantage of this sector is it requires less investment and has a greater return on investment. This is the reason why it creates employment on a large scale and has reduced the unemployment and underemployment problems to an extent.

Older Definition of MSME

The micro, small and medium enterprises (MSMEs) were earlier defined on the basis of investments put in, but now after the recent changes by the FM, the revised definitions will also include another factor, i.e. turnover of the company. Though there was not a fixed definition and also varied from country to country, the older way of classifying MSMEs.

Service Sector

Enterprise	Investment in Equipment
Micro Enterprise	< or = Rs. 10 lakh
Small Enterprise	> Rs. 10 lakh, < Rs. 2 crore
Medium Enterprise	> Rs. 2 crore, < Rs. 5 crore

Manufacturing Sector

Enterprise	Investment in Plant and Machinery
Micro Enterprise	< or = Rs. 25 lakh
Small Enterprise	> Rs. 25 lakh, < Rs. 5 crore
Medium Enterprise	> Rs. 5 crore, < Rs. 10 crore

New Definition of MSME

Changes were made in the investment and turnover figures, which resulted in a larger number of medium-sized enterprises. The MSME new Udyam Registration in india is the new process implemented by the government of India to empower the ease of doing business and make the registration procedure more easy and simple for the entrepreneurs. Under Udyam Registration a business person can register just on the basis of Aadhaar card.

Updated Definition of MSME

Enterprise	Investment	Turnover
Micro Enterprise	Rs 1 crore	Rs 5 crore
Small Enterprise	>Rs 10 crore	Rs 50 crore
Medium Enterprise	Rs 50 crore	Rs 250 crore

Benefits of Change in Definition

With a clear vision of an ‘Atmanirbhar Bharat’ , our Prime Minister, Narendra Modi worked towards promoting the idea of self-reliance, as clearly suggested by the name itself. MSMEs had faced a drastic impact due to the current situation and hence, some schemes for MSMEs were introduced by the PM. One of them involved changing the definition of MSMEs.

The following are the benefits for MSMEs after the change in the definition –

Ease of business
Easier to pay taxes
More job creation
Better employment opportunities
Effective investments
Fair classification
Middle ground for investment in equipment and plant and machinery.
Easier to avail benefits of government's schemes such as the Interest Subvention Scheme and the Fund of Funds scheme.

The government felt it was necessary to recognize MSMEs in a better and effective way. Hence, the idea of considering turnover instead of investment was put up. This has and most certainly will help MSMEs to grow and avail maximum benefits.

Refer to our site @e-registration.co.in for more information regarding MSMEs and reach out to us for any assistance.