Indian MSMEs: A New Outlook

MSME is abbreviated form for Micro, Small and Medium Enterprises.The Government of India devised the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 on 02nd October, 2006. As per the Act, categorization of enterprises was done into micro, small and medium enterprises based upon investment in plant & machine for manufacturing & production industry and investment in equipment for service industry. This has been revised by Indian government while unveiling the relief package for MSME on 13.05.2020. The definition of MSME has been revised as under:

REVISED MSME CLASSIFICATION Effective from (01.07.2020)
Criteria: Investment in Plant & Machinery or Equipment and Annual Turnover
Classification Micro Small Medium
Manufacturing Enterprises & Service Enterprises Investment< Rs 1 Crore and

Turnover< Rs 5 Crore

Investment< Rs 10 Crore and

Turnover< Rs 50 Crore

Investment< Rs 50 Crore and

Turnover< Rs 250 Crore

Note: Export revenue for micro, small or a medium enterprises will not be included while classifying the company

As of now, MSME registration is not mandated but it is beneficial to get registered to avail several benefits. Few to name:

  • Credit facilities without collateral (Latest scheme).
  • No fresh insolvency proceeding against MSMEs for 1 year.
  • 45-days credit period for the recipient of any goods or services to pay to the MSME supplier.
  • Interest reduction ranging between 1 to 1.5 % on overdraft and other loans.
  • Minimum alternate tax (MAT) allowed to be carried forward for up to 15 years instead of 10 years
  • MSME specific government tenders.
  • ISO certification charges reimbursement allowed to MSME.
  • Preferential treatment for government license and certification.
  • Several MSME oriented rebates, subsidies (including capital subsidies), incentives and concessions.
  • One-time settlement fee for non-paid amounts of MSME.

Aside, the Government has launched several schemes to support MSMEs which can be categorised as under:

  • Credit and Financial Assistance Scheme:
  • Prime Minister’s Employment Generation Programme (PMEGP)
  • Credit Linked Capital Subsidy Scheme for Technology Upgradation (CLCSS)
  • Infrastructure Support to MSMEs:
  • Scheme of Fund for Regeneration of Traditional Industries (SFURTI)
  • MSE Cluster Development Programme (MSE-CDP)
  • Technology Upgradation and Competitiveness Scheme for MSMSEs
  • Design Clinic Scheme
  • Lean Manufacturing Competitiveness Scheme (LMCS)
  • Digital MSME Scheme
  • Financial Support to MSMEs in ZED Certification Scheme
  • Support for Entrepreneurial and Managerial Development of MSMEs through Incubators
  • Tool Rooms & MSME Technology Centres

What’s new for MSMEs?

The MSME stimulus package unveiled by FINMIN on 13.05.2020 has opened new avenues for upliftment of MSMEs. The opportunities unveiled are presented here under:

  • Widening of the definition of MSME ensure more business to qualify as MSME and avail benefit.
  • 3 lakh crores collateral free Automatic loans for business including MSME.
  • 20,000 crore subordinate debt for MSMEs.
  • 50,000 crore equity infusion through MSME Fund of Funds.
  • Global tender to be disallowed upto Rs 200 Crores.
  • E-Market linkage for MSMEs.
  • Continuous monitoring of settlement of dues to MSME vendors from Government and Central Public Sector Undertakings.
  • MSME receivables from Government and Central public sector enterprises to be released in 45 days.

Disclaimer: This content is meant for information only and should not be considered as an advice or opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

Leave a Reply

Your email address will not be published. Required fields are marked *