Earlier, MSME classification were done on the basis of the amount of capital invested in the company. It was determined as the entire amount of money spent on the facility’s machinery, equipment and plant.
For a company manufacturing goods-
- Micro Enterprise- Upto Rs. 25 lakhs
- Small Enterprise- Rs. 25 lakhs – 5 crores
- Medium Enterprise- Rs. 5 crores – 10 crores
For a service organisation-
- Micro Enterprise- Upto Rs. 10 lakhs
- Small Enterprise- Upto Rs. 10 lakhs – 2 crores
- Medium Enterprise- Rs. 2 crores – 5 crores
As a result of this classification, the government was forced to spend money to physically check the assets and record the real investments made.
MSME Classification
But now government decided to go with turnover, MSME organisations that provide both goods and services are classified as follows:-
Micro Enterprise- Upto Rs. 5 Crores
Small Enterprise- Rs. 5 Crores – 75 crores
Medium Enterprise- Rs. 75 crores – 250 crores
The government recently enacted a new bill that categorises MSMEs based on yearly sales rather than investment.
The improved methodology for classifying MSMEs based on turnover has made it simpler for the government and the business community to identify a company as an MSME.
The government can check the GST database to see if the reported turnover matches the real turnover of an organisation and then categorise that organisation as an MSME.
There is just one basis of categorization for the products and service sectors in the updated parameters, as opposed to the old classification basis, which had various criteria for each.
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