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Classification of MSME

       [Updated as on June 3, 2020]

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MSME stands for Micro, Small and Medium Enterprises. An “enterprise” is defined in MSMED Act,2006 as an industrial undertaking or a business concern or any other establishment, by whatever name called, engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 (55 of 1951) or engaged in providing or rendering of any service or services. First Schedule to the Industries (Development and Regulation) Act, 1951 contains a list of 38 industries engaged in the manufacture or production of articles as mentioned under each of the headings or sub-headings mentioned there under.

 

Click here to view the list of industries as per the First Schedule.

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The Government of India has enacted the Micro Small and Medium Enterprises Development Act, 2006 to provide for facilitating the promotion and development and enhancing the competitiveness of micro, small and medium enterprises and for matters connected therewith or incidental thereto.

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Classification of MSMEs

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As per section of MSMED Act,2006, , the Central Government may by notification 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,

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(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:

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• a micro enterprise, where the investment in plant and machinery does not exceed twenty five lakh rupees;

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• a small enterprise, where the investment in plant and machinery is more than twenty-five lakh rupees but does not exceed five crore rupees; or

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• a medium enterprise, where the investment in plant and machinery is more than five crore rupees but does not exceed ten crore rupees;

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(b) in the case of the enterprises engaged in providing or rendering of services, as:

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• a micro enterprise, where the investment in equipment does not exceed ten lakh rupees;

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• a small enterprise, where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees; or

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• a medium enterprise, where the investment in equipment is more than two crore rupees but does not exceed five crore rupees.

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Ministry of Micro, Small and Medium enterprises vide notification No. S.O. 1702(E) dated 1st June, 2020, has revised the criteria for classification of micro, small and medium enterprises as under:

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• a micro enterprise-  Enterprise with investment in Plant and Machinery or Equipment not exceeding one crore rupees and turnover not exceeding five crore rupees;

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• a small enterprise- Enterprise with investment in Plant and Machinery or Equipment not exceeding ten crore rupees and turnover not exceeding fifty crore rupees;

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• a medium enterprise- Enterprises with investment in Plant and Machinery or Equipment not exceeding fifty crore rupees and turnover not exceeding two hundred and fifty crore rupees.

 

This notification shall come into effect from 01.07.2020

 

In calculating the investment in plant and machinery, following shall be excluded:

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1. the cost of pollution control

2. research and development expenses

3. Cost of industrial safety devices; and

4. such other items as may be specified, by notification

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In the calculation of turnover, the value of exports will be excluded [as per PIB release dated 03.06.2020 applicable w.e.f from 01.07.2020]

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Also the micro and small enterprises with the exception of medium enterprises can enjoy the benefit of exemption from the applicability of provisions of Industries (Development and Regulation) Act, 1951 if so notified by the Central Government and also the benefit of exclusive production of reserved articles declared as such vide the provisions of section 29B of the Industries (Development and Regulation) Act, 1951.