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Government Approves Change In The Criteria For Classifying MSME’s

Author: CA Manan Trivedi
Posted On: Tuesday 13 February 2018

Tags: MSME micro industry reforms plant & machinery msme classification

The Union Cabinet on 8th February, 2018, in a meeting chaired by Prime Minister NarendraModi, approved the change in criteria for classifying entities as MSME from classification based on the “investment in Plant & Machinery (P&M) for manufacturing units and investment in Equipments for service oriented enterprises” to “annual turnover”.

The existing limits for investment in P&M / Equipments as per the provisions of Micro, Small & Medium Enterprises Development Act, 2006 are as under:

Existing Criteria:


Manufacturing Sector

Service Sector


Investment in P&M

Investment in Equipments


Not exceeding Rs.25 Lakhs

Not exceeding Rs.10 Lakhs


More than Rs.25 Lakhs but not exceeding Rs.5 crores

More than Rs.10 Lakhs but not exceeding Rs.2 crores


More than Rs.5 crores but not exceeding Rs.10 crores

More than Rs.2 crores but not exceeding Rs.5 crores


The Union Cabinet has approved the criteria based on annual turnover of the enterprises for classification. The new criteria is as under:

Proposed Criteria:


Manufacturing Sector or Service Sector


Annual Turnover


Not exceeding Rs.5 crores


More than Rs.5 crores but not exceeding Rs.75 crores.


More than Rs.75 crores but not exceeding Rs.250 crores.

The change is with a view to extend benefits to larger number of entities and encourage ease of doing business in the country. Also, it is a step to align the classification norms with the GST making it more growth oriented.

Section 7 of the Micro, Small & Medium Enterprises Development Act, 2006 shall be amended suitably in due course of time to replace the existing classification norms. 

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