MSME LIMIT BY TURNOVER OR INVESTMENT

[Satbir singh wahi]

PLS GUIDE WHETHER NOW LIMIT FOR MSME IS BY INVESTMENT OR TURNOVER

[YAGAY and SUN]

What's MSME

What are Micro, Small & Medium Enterprises ?

Definitions of Micro, Small & 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:

1. Manufacturing Enterprises-he enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the industries (Development and regulation) Act, 1951) or employing plant and machinery in the process of value addition to the final product having a distinct name or character or use. The Manufacturing Enterprise are defined in terms of investment in Plant & Machinery.

2. Service Enterprises:-The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment..

The limit for investment in plant and machinery / equipment for manufacturing / service enterprises, as notified,vide S.O. 1642(E) dtd.29-09-2006 are as under

Manufacturing Sector
Enterprises	Investment in plant & machinery
Micro Enterprises	Does not exceed twenty five lakh rupees
Small Enterprises	More than twenty five lakh rupees but does not exceed five crore rupees
Medium Enterprises	More than five crore rupees but does not exceed ten crore rupees
Service Sector
Enterprises	Investment in equipments
Micro Enterprises	Does not exceed ten lakh rupees:
Small Enterprises	More than ten lakh rupees but does not exceed two crore rupees
Medium Enterprises	More than two crore rupees but does not exceed five crore rupees

[Satbir singh wahi]

sir,

I READ THIS ARTICLE ,AND CLAIMED ON TURNOVER, BUT PLS GUIDE.

Ministry of Micro, Small & Medium Enterprises
Amendment in the basis of criteria of classification of Micro, Small and Medium
enterprises under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006
[
The criteria for classifying Micro, Small and Medium enterprises under the Micro, Small and
Medium Enterprises Development (MSMED) Act, 2006 has been changed by the Union Cabinet as
on 07.02.2018 from the existing criteriaof ‘investment in plant & machinery/equipment’ to ‘annual
turnover’.The existing provisions and the amendment is summarized below:-
Existing Provisions/ Criteria:-The existing criteria for classifying an enterprise as Micro, Small
and Medium enterprises wasprescribed under the provisions of Section 7 of the MSMED Act,
2006which classified the Micro, Small and Medium Enterprises (MSMEs) on the basis of
investment in plant and machinery for manufacturing units, and investment in equipment for service
enterprises. The relevant extract of Section 7 is reproduced asfollows:-
“7. Classification of enterprises- (1) Notwithstanding anything contained in section 11B of the
Industries (Development and Regulation) Act, 1951 (65 of 1951), the Central Government may, for
the purposes of this Act, by notification and having regard to the provisions of sub-sections (4) and
(5), classify any class or classes of enterprises, whether proprietorship, Hindu undivided family,
association of persons, co-operative society, partnership firm, company or undertaking, by
whatever name called,-
(a) in the case of the enterprises engaged in the manufacture or production of goods pertaining to
any industry specified in the First Schedule to the Industries (Development and Regulation)
Act, 1951 (65 of 1951), as-
(i) a micro enterprise, where the investment in plant and machinery does not exceed
twentyfive lakh rupees;
(ii) a small enterprise, where the investment in plant and machinery is more than twentyfive
lakh rupees but does not exceed five crore rupees; or
(iii) a medium enterprise, where the investment in plant and machinery is more than five
crore rupees but does not exceed ten crore rupees;
(b) in the case of the enterprises engaged in providing or rendering of services, as-
(i) a micro enterprise, where the investment in equipment does not exceed ten lakh
MARCH 2018
Sanjay Vasudeva
2
CORPORATE LAWS UPDATE
rupees;
(ii) a small enterprise, where the investment in equipment is more than ten lakh rupees
but does not exceed two crore rupees;
(iii) a medium enterprise, where the investment in equipment is more than two crore
rupees but does not exceed five crore rupees.
Explanation 1.-For the removal of doubts, it is hereby clarified that in calculating the investment
in plant and machinery, the cost of pollution control, research and development, industrial safety
devices and such other items as may be specified, by notification, shall be excluded.
Explanation 2.-It is clarified that the provisions of section 29B of the Industries (Development
and Regulation) Act, 1951 (65 of 1951), shall be applicable to the enterprises specified in subclauses
(i) and (ii) of clause (a) of sub-section (1) of this section……”
Amendment:- By virtue of the amendment, Section 7 of the MSMED Act, 2006 now definesthe
units producing goods and rendering services in terms of annual turnover as follows:
• A micro enterprise will be defined as a unit where the annual turnover does not exceed Rs.
5 Crore;
• A small enterprise will be defined as a unit where the annual turnover is more than five
crore rupees but does not exceed ₹ 75 crore;
• A medium enterprise will be defined as a unit where the annual turnover is more than
seventy five crore rupees but does not exceed ₹ 250 crore.
• Additionally, the Central Government may, by notification, vary turnover limits, which
shall not exceed thrice the limits specified in Section 7 of the MSMED Act.
The Key
This step is in line with the efforts of the Government towards “Ease of Doing Business” and is in
sync with international norms. Accordingly, the Government has decided to adopt the turnover
criteria as against the criteria of investment in plant and machinery and hopes that the
simplification of definition will promote setting up of new MSMEs and expansion of existing
MSMEs with induction of new technologies due to removal of cap on investment in plant &
machinery. Further ,with data being available with the GSTN, it would be easier for the
Government to keep a track and formulate policies for this particular sector.

[YAGAY and SUN]

What is your exact query on this matter?

[Satbir singh wahi]

Query is whether msme limit is definied. By turnover or investment. The article I read says by turnover. But Dept not accepting. What is correct .pls guide.

[YAGAY and SUN]

You are right as the classification has been changed by the Cabinet in Feb 2018.

Cabinet

Cabinet approves proposal for Amendment to the Micro, Small and Medium Enterprises Development Act, 2006 to change the criteria of classification and to withdraw the MSMED (Amendment) Bill, 2015 – pending in Lok Sabha

Posted On: 07 FEB 2018 8:14PM by PIB Delhi

The Union Cabinet chaired by the 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’.

This 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).

Section 7 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 will accordingly be amended to define units producing goods and rendering services in terms of annual turnover as follows:

• A micro enterprise will be defined as a unit where the annual turnover does not exceed five crore rupees;
• A small enterprise will be defined as a unit where the annual turnover is more than five crore rupees but does not exceed ₹ 75 crore;
• A medium enterprise will be defined as a unit where the annual turnover is more than seventy five crore rupees but does not exceed ₹ 250 crore.
• Additionally, the Central Government may, by notification, vary turnover limits, which shall not exceed thrice the limits specified in Section 7 of the MSMED Act.

At present the MSMED Act (Section 7) classifies the Micro, Small and Medium Enterprises (MSMEs) on the basis of investment in plant and machinery for manufacturing units, and investment in equipment for service enterprises. The criterion of investment in plant and machinery stipulates self declaration which in turn entails verification if deemed necessary and leads to transaction costs.

Taking turnover as a criterion can be pegged with reliable figures available e.g. in GST Network and other methods of ascertaining which will help in having a non discretionary, transparent and objective criteria and will eliminate the need for inspections, make the classification system progressive and evolutionary, help in overcoming the uncertainties associated with the classification based on investment in plant & machinery/equipment and employment, and improve the ease of doing business. In addition the amendment will provide flexibility to the Government to fine-tune the classification of MSMEs in response to changing economic scenario without resorting to the amendment of MSMED (Micro, Small & Medium Enterprises Development) Act.

The change in the norms of classification will enhance the ease of doing business. The consequent growth and will pave the way for increased direct and indirect employment in the MSME sector of the country.

*****

AKT/VBA/SH

(Release ID: 1519587) Visitor Counter : 645

[YAGAY and SUN]

Please also check it has been passed by lok sabha & rajya sabha both and got the Presidential consent to become a law.

[Satbir singh wahi]

Sir

thanks for updating . I will give this print out to PPCB dept. , and claim as per turnover, which they are denying. But strange MSME portal has not updated yet.

[Kishan Barai]

But can you let us know what claim / incentives you would like to get it from MSME so that we could guide you in better way.

[Satbir singh wahi]

WE HAVE APPLIED WITH PUNJAB POLLUTION BOARD FOR CLEARANCE , AND THEY ASKED FOR MSME CLASSIFICATION OF OUR UNIT. WE CLASSIFIED ON TURNOVER BUT THEY INSIST ON INVESTMENT. STRANGE MSME PORTAL DOES NOT MENTION TURNOVER. GIVE SOME PROOF TO GIVE THEM.

[Kishan Barai]

It's very much strange that Punjab Pollution Control Board is asking for MSME Classification, Gujarat Pollution Control Board never ask for such certification. Moreover we get such license for Free. I think center must monitor the pollution control board certificate. Many times frameworks are easy but bottom level Personal might not copeup with latest rules & reg.

[Satbir singh wahi]

WHAT PRINT OUT SHOULD I GIVE TO SATISFY THEM OF AMENDMENT.

[Kishan Barai]

Give them the amended print to satisfy them.

[Satbir singh wahi]

THANKS

[YAGAY and SUN]

Generally State Pollution Control board wants to know under which category an Industrial Unit would be classified as they intent to estimate the level of pollution such industrial units would generate while manufacturing of goods. This is the reason they are asking for the MSME Certificate.

[Kishan Barai]

True but Pollution Control Board provide Specific quota form in it we need to declare the quantity to be be imported for a perticular kind of scrap.

[YAGAY and SUN]

Yes, We are in agreement with you that such permissions are called consents which State Pollution Control Board provides to the Industrial Units under such framework an Industrial Units have to operate their businesses.

AI Summary

MSME classification by annual turnover replaces investment criterion, shifting eligibility to verifiable turnover-based rules.
The amendment replaces the investment-based classification of micro, small and medium enterprises with an annual turnover-based classification under Section 7 of the MSMED Act, and empowers the Central Government to vary turnover limits by notification; the change aims to make classification objective, verifiable using tax data, reduce transaction costs and inspections, and promote ease of doing business, while noting some administrative implementation gaps at the state level.