Page 18 - Plastics News February 2018

CIRCULAR

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

he Union Cabinet chaired by the Prime Minister Shri the MSMED Act (Section 7) classifies the Micro, Small and
TNarendra Modi has approved change in the basis of Medium Enterprises (MSMEs) on the basis of investment
classifying Micro, Small and Medium enterprises from in plant and machinery for manufacturing units, and
‘investment in plant & machinery/equipment’ to ‘annual investment in equipment for service enterprises. The
turnover’.This will encourage ease of doing business, criterion of investment in plant and machinery stipulates
make the norms of classification growth oriented and self declaration which in turn entails verification if deemed
align them to the new tax regime revolving around GST necessary and leads to transaction costs.
(Goods & Services Tax). Taking turnover as a criterion can be pegged with reliable
Section 7 of theMicro, Small and Medium Enterprises figures available e.g. in GST Network and other methods of
Development (MSMED) Act, 2006 will accordingly be ascertaining which will help in having a non discretionary,
amended to define units producing goods and rendering transparent and objective criteria and will eliminate
services in terms of annual turnover as follows: the need for inspections, make the classification system
progressive and evolutionary, help in overcoming the
A micro enterprise will be defined as a unit where the uncertainties associated with the classification based
annual turnover does not exceed five crore rupees; on investment in plant & machinery/equipment and
A small enterprise will be defined as a unit where the employment, and improve the ease of doing business.
annual turnover is more than five crore rupees but does In addition the amendment will provide flexibility to the
not exceed Rs 75 crore; Government to fine-tune the classification of MSMEs in
response to changing economic scenario without resorting
A medium enterprise will be defined as a unit where the to the amendment of MSMED (Micro, Small & Medium
annual turnover is more than seventy five crore rupees Enterprises Development) Act.
but does not exceed Rs 250 crore.
The change in the norms of classification will enhance the
Additionally, the Central Government may, by notification, ease of doing business. The consequent growth and will
vary turnover limits, which shall not exceed thrice the pave the way for increased direct and indirect employment
limits specified in Section 7 of the MSMED Act.At present
in the MSME sector of the country.

Plastics News Feb ruar y 2018 18