As per the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 enacted by the Government of India, the definition of an MSME encompasses Micro, Small and Medium Enterprises which are further classified into two broad categories.
Companies in the Manufacturing Sector
Enterprises involved in the manufacturing or production of goods for an industry listed in the first schedule of the Industries (Development and Regulation) Act, 1951 are included within the scope of MSME meaning.
Also, enterprises employing plant & machinery to add value to a finished product that results in a distinct name, use or character, come within the purview of micro small and medium enterprises meaning.
Based on their annual turnover, enterprises are classified under the following sub-categories.
|Companies with investment not more than Rs. 1 crore and turnover up to Rs. 5 crore.||Companies with investment up to Rs. 10 crore and turnover not more than Rs. 50 crore.||Companies with investment not more than Rs. 50 crore and turnover not more than Rs. 250 crore.|
Companies in the Service Sector
The MSME full form also extends to enterprises in the service sector. The sub-categorisation of companies in the service sector based on their annual turnover is as follows.
|Companies with investment up to Rs. 1 crore and annual turnover not more than Rs. 5 crore.||Companies with Rs. 10 crore investment and turnover up to Rs. 50 crore.||Companies with investment of up to Rs. 50 crore and turnover ranging between Rs. 50 crore and Rs. 250 crore.|
In order to boost businesses, the government has recently revised the criteria of classification of MSMEs under the MSMED Act 2006 which came into effect from July 1, 2020.
The new classification of what is MSME will have the following categorisations based on its annual turnover and investment in plant/machinery/ equipment irrespective of whether they belong to the manufacturing or the service sector.
|Firms with investment not exceeding Rs. 1 crore and turnover up to Rs. 5 crore||Companies with investment of not more than Rs. 10 crore and turnover between Rs. 5 core and Rs. 50 crore||Enterprise with a turnover of Rs. 250 crore and investment of Rs. 50 crore.|
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