900 319 0030

MSME Development (Amendment) Bill 2018

iasparliament Logo
July 30, 2018

Why in news?

The Centre has tabled the MSME Development (Amendment) Bill 2018 in Parliament.

What are the key provisions?

  • The Bill amends the Micro, Small and Medium Enterprises Development Act, 2006.
  • Under the Act, manufacturing units are defined depending on their investments in plant and machinery as:
  1. micro enterprises (below Rs.25 lakh)
  2. small enterprises (Rs.25 lakh to Rs.5 crore)
  3. medium enterprises (Rs.5 crore to Rs.10 crore)
  • The thresholds were lower for services units.
  • Under the Bill, all MSMEs will be classified on the basis of their annual turnover.
  • This is irrespective of whether they are manufacturing or service-providing enterprises.
  • Now, the units will be
  1. ‘micro’ enterprises if their annual sales turnover is less than Rs.5 crore
  2. ‘small’ if they fall in the Rs.5-75 crore range
  3. ‘medium’ if they are in the Rs.75-250 crore band
  • The central government may change these annual turnover limits through a notification.
  • The maximum turnover may be up to three times the limits specified in the Bill.

What are the benefits?

  • Starters - MSMEs are offered a range of incentives and tax benefits, to promote them.
  • Under the current definition, the newer units often face disadvantages.
  • As, their higher investments, as part of the industrial modernisation efforts, keeps them out of MSME definition.
  • Hence, the turnover criterion is a more pragmatic way to incentivise industry.
  • It facilitates fairer comparisons between older and newer ventures and helps starters in utilising MSME sops.
  • Sectors - Turnover-based sops may be friendlier to technology-intensive sectors.
  • These include engineering, auto components or pharmaceuticals.
  • Substantial capital investments are needed to ensure even minimal scale in these.
  • Here again, turnover, instead of investment criterion, would be more beneficious.
  • Procedure - The annual turnover criteria can be directly verified from the GST Network.
  • It thus puts an end to physical inspections necessitated by the investment-based regime.
  • Efficiency - Turnover criteria will allow a unit to graduate from its MSME status on reaching a fair size.
  • It will discourage the proliferation of inefficient units created mainly with an eye to utilise sops.
  • The Centre should consider a sunset clause on MSME benefits to encourage small units to climb up the value chain.


Source: PRSIndia, BusinessLine

Login or Register to Post Comments
There are no reviews yet. Be the first one to review.



Free UPSC Interview Guidance Programme