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What is the Threshold Limit of MSME before and after Covid-19 Raised by the Government?

calendar17 Dec, 2020
timeReading Time: 5 Minutes
Threshold Limit of MSME

The Central Government has again modified the MSME threshold limit. Lately, under the recently announced Atmanirbhar Bharat Special economic & comprehensive relief package of RS. 20 lakh crores, the Central Government had made changes in the definition of MSMEs and had specified a new threshold limit of MSMEs in India.

Threshold Limit of MSME Raised by the Government

An enterprise has to be classified as a Micro, Small and Medium Enterprise on the basis of the below-mentioned criteria:-

Threshold Limit of MSME

Micro-enterprise

If the investment in the equipment or plant and machinery does not exceed Rs. 1 crores and threshold limit of MSME does not exceed Rs. 5 crores;

Small enterprise

If the investment in the equipment or plant and machinery does not exceed Rs. 10 crores and threshold limit of MSME does not exceed Rs. 50 crores;

Medium enterprise

If the investment in equipment or plant and machinery does not exceed Rs. 50 crores and threshold limit of MSME does not exceed Rs. 250 crores.

How can anyone Become a Micro, Small, or Medium Enterprise (MSME)?

At present, any individual who desires to establish Micro, Small or Medium Enterprise (MSME) must acquire the Udyam Registration online. This is done on the Udyam Registration online portal.

  • The Udyam MSME Registration has to be based on self-declaration.
  • There’s no prerequisite to upload papers, certificates, documents or proof.
  • Only pertinent information concerning the scope of business shall be necessary.
  • Nonetheless, calculation of investment in equipment or machinery and plant shall be prepared by linking of preceding years’ ITR filing.

How can I get Udyam MSME Registration?

We will help you throughout in the process of acquiring the Udyam MSME Registration. Our experienced professionals will assist you on every step of the procedure and the formalities for acquiring the Udyam MSME Registration.

Revision of MSME Definition and Modalities

In line with Central Governments’ top focus on reviving MSMEs in the country after the effect of COVID-19, a special meeting of Cabinet Committee on Economic Affairs (CCEA) was summoned under the Chairmanship of Prime Minister Shri Narendra Modi, which allowed the upward alteration of MSME definition and modalities/ road map for laying down successful implementation mechanism for the residual of two announcements under the Atmanirbhar Bharat Package.

What is Included in the Relief Package?

In the relief package, the definition of micro manufacturing and services unit is increased to Rs. 5 crores for turnovers and Rs. 1 crore of investment. The limit of small unit is increased to Rs 50 crores for turnovers and Rs 10 crores for investment.

In the same way, the limit for medium unit is increased to Rs. 20 crore of investment and Rs. 100 crore of turnovers. It may be noted that this amendment was done after 14 years since the MSME Development Act[1] was enacted in 2006.

Subsequent to the package announcement on May 13th, 2020, there were some representations that the announced amendment is still not in tune with pricing conditions and market conditions and it should be further modify upwards. Keeping in mind these representations, it was determined to increase the limit for medium manufacturing units and service units.

Now it will be Rs. 250 crores of turnovers and Rs. 50 crores of investment. It was also decided that the turnover with respect to exports will not be considered in the limits of turnover for any class of MSME units whether micro, small or medium. Yet this is another step on the path of ease of doing business in India. This will help in creating more jobs in the MSME sector for attracting more investments. Details Regarding Revised Limits.

Details Regarding Revised Limits

Category Old Capital New Capital New Turnover Old Turnover
Micro 25 Lakh 1 Crore 10 Lakh 5 Crores
Small 5 Crores 10 Crores 2 Crores 5 Crores
Medium 10 crores 50 Crores 5 Crores 250 Crores

Approvals Related to MSMEs

  • Consent for provisioning of INR 20,000 crore as subordinate debt to provide equity support to the stressed MSMEs. This will benefit 2 lakh stressed MSMEs.
  • Approval for equity infusion of Rs. 50,000 crores for MSMEs through Fund of Funds (FoF). This will create a framework to help MSMEs in capacity amplification. This will also provide an opening to get listed in stock exchanges.

With implementation Modalities and Road Map for intact components of the Atmnirbhar Bharat Abhiyan package are in place. This will facilitate in creating more jobs in the MSME sector and attracting more investments.

Role of MSMEs in Covid-19 Pandemic

In the repercussion of COVID-19 pandemic, Prime Minister Shri Modi was swift to recognize the role of MSMEs in the growth of the Nation. As such, MSMEs shaped a very major part of the announcements made under the Atmanirbhar Bharat Abhiyaan.

Under this package, the MSME sector has not only been given significant allocation but has also been accorded precedence in implementation of the measures to revitalize the economy. To provide instant relief to MSME sector, various announcements have been made under this Package.

The Important Announcements

  • Rupees Three lakh crore of collateral-free loans provided to MSME sector to meet operational liabilities, procure raw material and resume businesses.
  • Amendment of MSME definition to provide maximum benefits to the MSME sector;
  • Prohibiting global tenders in procurements up to Rs. 200 crores- to generate more opportunity for domestic establishments,
  • Clearing of MSME dues by the Public Sector Units and Government within 45 days.
  • Central Government has been taking all essential steps to make sure that the benefit of these landmark announcements reaches to the MSME sector at the earliest. In this regard, essential policy decisions have been taken and the implementation plan has been put in place.
  • The scheme for Rupees Three lakh crore of collateral-free loans was permitted by CCEA and has been officially launched.
  • Modalities have worked out for upward revision of MSME Definition making it more comprehensive broad-based providing better avenues to MSME sector to harness their potentials.
  • In the same way, amendments in General Financial Rules authorizing no global tenders for procurement up to two hundred crores have been carried out. The new regulations have already been issued. This will open up new business opportunities for domestic MSMEs.
  • To make sure that payments of MSMEs are released within the 45 days, guidelines have been issued at the level of Cabinet Secretary and Expenditure Secretary.
  • To further ease the load on MSMEs, RBI has extended moratorium on repayment of loans for another three months.

To administer all this, a robust ICT based system called CHAMPIONS has been launched by the Ministry of MSME. The online portal is not only helping MSMEs in the present circumstances, but is also providing direction to grasp the new business opportunities and in the long run, become national or international Champions.

The Ministry of MSME is dedicated to support the MSME sector, and the people who are dependent on them. All the hard work is being made to support MSMEs to take benefit of the initiatives under the Atmanirbhar Bharat package.

Conclusion

Micro, small and Medium Enterprises or popularly known as MSMEs are the spine of Indian economy & silently operating in different cities across the country, more than 6 crore. MSMEs are playing a vital role in making India self-reliant.

This micro, small and medium enterprises have a huge impact on the country’s GDP-making a contribution of 29 percent. Threshold Limit of MSME sector contributes to almost half of exports from India. Most importantly, more than 11 crore people are employed in MSMEs.

Read our article: What are the Positive and Negative Factors of the Implication of GST under MSMEs?

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