The Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. These enterprises power India, accounting for almost 40% of gross industrial value and 45% of total direct and indirect exports. As per the data available with Central Statistics Office (CSO), the contribution of MSME Sector in Country’s GDP was 28.77% in the year 2015-16.
The Government has introduced various schemes and aids to ensure the MSMEs lead a struggle free existence in the Country and also contribute effectively to the Indian Economy. In this Article, we have given a brief outline on MSMEs and the benefits available to them.
Definitions of Micro, Small and Medium Enterprises
In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006, the Micro, Small and Medium Enterprises (MSME) are classified in two classes:
The limit for investment in plant and machinery for manufacturing enterprises and investment in equipment for service enterprises are as under:
|Classified As||Investment in plant & machinery|
|Micro Enterprises||Does not exceed INR 2.5 million|
|Small Enterprises||More than INR 2.5 million but does not exceed INR 50 million|
|Medium Enterprises||More than INR 50 million but does not exceed INR 100 million|
|Classified As||Investment in equipment|
|Micro Enterprises||Does not exceed INR 1 million|
|Small Enterprises||More than INR 1 million but does not exceed INR 20 million|
|Medium Enterprises||More than INR 20 million but does not exceed INR 50 million|
Types of Enterprises Eligible to be Registered Under MSMED Act, 2006
All classes of enterprises, namely:
can apply for the registration and get qualified for the benefits provided under the Act.
Registration under MSMED Act, 2006
Registration under MSMED Act is Voluntary and not Compulsory.
Benefits of Registration under MSMED Act, 2006
Any Buyer who purchased any goods or availed any services from Micro or Small enterprises which has filed a memorandum with the authority, then the buyer shall make the payment on or before the date agreed upon between him and the supplier in writing or within a period of 15 days from the day the goods are delivered or services are rendered subject to a maximum of 45 days from the date of delivering product or services.
However, this limitation on Credit Period is sometimes interpreted as a restriction by large enterprises in commercial negotiations with MSMEs and therefore, a careful evaluation of the registration requirement should be done before taking such registration under MSMED Act.
Amendment to the Micro, Small and Medium Enterprises Development Act, 2006
The Union Cabinet chaired by Prime Minister Shri Narendra Modi has approved change in the basis of classifying Micro, Small and Medium Enterprises from ‘Investment in Plant & Machinery/Equipment’ to ‘Annual Turnover’ on 07.02.2018 but the same is pending for approval in Lok Sabha.
This change will encourage ease of doing business, make the norms of classification growth oriented and align them to the new tax regime revolving around GST (Goods & Services Tax). For more information on the same, please click here.