Insights

The Union cabinet has approved further changes to the definition of Micro, Small and Medium enterprises, a Rs 20,000-crore fund to provide equity support to stressed entities in the sector; under this scheme, the government will provide guarantee coverage of up to 85 percent for loans up to Rs 5 lakh and 75 percent for loans beyond Rs 5 lakh from financial institutions. Also, equity infusion of Rs 50,000 crore into MSMEs through a fund of funds. The proposed fund of funds aims to encourage private sector investments in the MSME sector by leveraging Rs 50,000 crore. Under the scheme, a Mother Fund would be setup where the Centre will be the anchor investor.

It has also been decided that the turnover with respect to exports will not be counted in the limits of turnover for any category of MSME units whether micro, small or medium. This is yet another step towards ease of doing business. This will help in attracting investments and creating more jobs in the MSME sector.

 

Revised MSME Classification on 1st June, 2020

Composite Criteria : Investment and Annual Turnover

Classification

Micro

Small

Medium

Manufacturing & Services

Investment < Rs. 1 Cr.

And

Turnover < Rs. 5 Cr.

Investment<Rs. 10 Cr.

And

Turnover < Rs. 50 Cr.

Investment < Rs. 50 Cr.

And

Turnover < Rs. 250 Cr.

 

Old MSME Classification on 13th May, 2020

Composite Criteria : Investment and Annual Turnover

Manufacturing & Services

Investment < Rs. 1 Cr.

And

Turnover < Rs. 5 Cr.

Investment<Rs. 10 Cr.

And

Turnover < Rs. 50 Cr.

Investment < Rs. 20 Cr.

And

Turnover < Rs. 100 Cr.

 Revised & Old Definition of MSMEs

To provide immediate relief to MSME sector during the pandemic, last month the Modi government has announced ?3 lakh crore collateral-free automatic loans for MSMEs to meet operational liabilities, buy raw material and restart businesses. To ensure that MSME payments are released within the timeframe of 45 days, directions have been issued at the level of Cabinet Secretary, Expenditure Secretary and Secretary, MSME. Also, to further ease the burden on MSMEs, RBI has extended moratorium on repayment of loans for another three months.

Also, a robust ICT-based system called CHAMPIONS has also been launched by the Ministry of MSME. The portal is not only helping and handholding MSMEs in the present situation, but is also providing guidance to grab the new business opportunities and in the long run, become national and international Champions.

 

At present, around 63.4 million MSME units in India contribute around 6.11 percent of manufacturing GDP and 24.63 percent of services GDP as well as 33.4 percent of India's manufacturing output. They provide more than 11 crore jobs.

 

 

 

 

 

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JAYESH SANGHRAJKA & CO LLP