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ARTICLE · 21 AUGUST 2020

New Classification Of MSMEs

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It is also pertinent to note that different thresholds were prescribed for being classified as an MSME based on the aforesaid factors, for enterprises engaged in manufacturing and services sector.

IndiaGovernment, Public Sector
Dipti Lavya Swain
Dipti Lavya Swain
Shruti Sundararajan
Shruti Sundararajan
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Government of India enacted Micro, Small and Medium Enterprises Development Act, 2005 (MSME Act) under which classification of micro, small and medium enterprises (MSME) was dependent on two factors: (i) investment in plant and machinery; and (ii) turnover of the enterprise. It is also pertinent to note that different thresholds were prescribed for being classified as an MSME based on the aforesaid factors, for enterprises engaged in manufacturing and services sector.

However, recently, under Aatmanirbhar Bharat Abhiyan (ABA), Ministry of Micro, Small and Medium Enterprises, vide its notification dated June 1, 2020, revised MSME classification by inserting a composite criterion for both investment in plant and machinery and annual turnover of enterprises. Also, the distinction between the manufacturing and the services sectors under erstwhile MSME definition has been done away with. This removal will create parity between the sectors.

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