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The government introduced the Micro, Small and Medium Enterprises Development (Amendment) Bill that would propose a change in criterion of classifying MSMEs from the existing system that is based on investment in plant and machinery or equipment to “annual turnover” of the enterprise.
Minister of State for MSMEs Giriraj Singh introduced the bill in the Lok Sabha, after he withdrew it in 2015. The amendment would classify any business with a turnover of up to INR 5 crores as a “micro enterprise”; those with turnover ranging between INR 5 crores to INR 75 crores as a “small enterprise” and businesses with turnover between INR 75 crores and INR 250 crores would be classified as
“medium enterprise”.
The Manmohan Singh-led government had put forth the MSME Act in 2006 to facilitate the promotion and development of MSMEs and to enhance competitiveness of the MSMEs.
The bill explains that during the stakeholders’ consultation, they observed that the criterion of investment in plant and machinery or equipment would need physical verification having associate transaction costs.
It tempts the promoters of the enterprise to keep their investments small to retain the benefits associated with MSMEs. The bill proposes that annual turnover should be the criterion for classification, with the Goods and Services Taxes Network can be use for determining the category of
the enterprises.
The bill concludes saying that the turnover-based classification will boost the ease of doing business overall and will put a transparent and objective classification system.
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