Learn How New MSME Definition Turning Beneficial for Companies

The MSME units can now have access to several sops like concessional finance and other additional benefits
  • BY Jaspreet Kaur

    Feature Writer, BusinessEx

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  • Jul 08,2020
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  • 8 Mins Read

Of late, the Indian government changed MSME definition. The move has taken to let more companies add in the MSME industry and avail benefits associated to this niche.  The reform will help organisations, which were not earlier under the MSME, to thrive now. The altercation in MSME definition was done by Union Cabinet headed by Narendra Modi.

Increased Count of MSME Units across India

The new MSME definition is applicable across India from 1 July onwards. As a result, a variation has been witnessed in the business landscape. Owing to the modified MSME definition, a large chunk of companies now fall into the MSME segment.  According to The Economic Times’ report, 99 per cent of the entities now fall under the category based on the twin parameters of investment and turnover.

The new MSME definition states that a company will be termed as micro enterprise if investment in upto INR1 crore and turnover is limited to INR 5 crore. While, a small enterprise needs to have investment up to INR 10 crore and turnover up to INR 50 crore. For medium-sized enterprises, investment has been set at INR 50 crore and turnover up to INR 250 crore.

By classifying companies on the basis of investment in plant and machinery, the MSME units can have access to several sops like concessional finance, according to the cited media report.

Government sources told the cited media agency that numbers with the GST authorities show that 99 per cent of the entities have a turnover that fits into the MSME definition. Over half of the businesses registered with GST Network have less than INR 20 lakh turnover, the earlier registration threshold.

Benefits for MSME Units

Under the new definition, the government has given a relief to the MSME units by excluding the export turnover. According to the cited media agency, IT department stated after modification of the MSME definition, a few thousand companies only have the written down value of assets, after including depreciation, which go over INR 50 crore.

This revelation has been lately made as the policymakers were unaware about this at the time of framing the policy.

To fill the loopholes, the MSME industry has identified that one Aadhaar number can be utilised to generate five Udyog Aadhar numbers. This would support companies to dole out their units into five individual companies and avail all benefits.     

Amending MSME definition has brought immense relief for the companies that were not earlier counted as MSME and have to employ ways to decrease their IT returns. By coming into the MSME sector, such organisations can utilise various benefits that are merely designed for MSME units.

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