The Micro, Small and Medium Enterprises (MSMEs) are small businesses which are classified in terms of investment made in plant and machineries if they are operating in the manufacturing sector and investment in equipment for service sector companies. They are governed under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.
The classification criteria (Before the amendment in Budget 2018);
Micro Enterprises- Ceiling on investment in Plant & Machinery below Rs 25 Lakh
Small Enterprises- Ceiling on investment in Plant & Machinery Rs 25 Lakh- Rs 5 cr
Medium Enterprises- Ceiling on investment in Plant & Machinery Rs 5 cr – Rs 10 cr
The Union Cabinet on 7th February 2018, approved a proposal to change the recognition criteria for classifying Micro, Small and Medium enterprises (MSMEs) from investment in plant and machinery to ‘annual turnover’.
The move is in addition to steps being taken to stimulate the MSME sector’s growth, including a cut in corporate tax from 30% to 25%, announced in the Union budget 2018 for entities with turnover of up to Rs 250 crore.