Ease of Doing Business for MSMEs: MSME association, Confederation of Indian Micro, Small and Medium Enterprises (CIMSME) in a letter addressed to the Ministry of MSME suggested that investment in plant, machinery and equipment should be the only basis for classification of MSMEs.
The letter was addressed to Dr. Rajneesh, Additional Secretary and Development Commissioner, MSME Ministry.
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It proposed that enterprises with investment in plant, machinery and equipment up to Rs 5 crores should be considered as micro enterprises, those with investment up to Rs 25 crores should be categorised as small enterprises and firms with investment up to Rs 50 crores should be taken as medium enterprises.
In the letter, CIMSME’s President Mukesh Mohan Gupta wrote that the current definition of MSMEs “is slightly complicated and may discourage MSMEs from growth.”
Citing reasons for the definition change, CIMSME noted that since Udyam is linked with GSTN (Goods and Service Tax Network) and Income Tax Portal, many MSMEs may choose not to register their firm on account of apprehension of sharing too much information with authorities and other such misconceptions.
Also, most of the Government schemes are applicable for micro and small enterprises as a result of which many entrepreneurs ensure their business doesn’t exceed the turnover threshold of Rs 50 crores.
“We have come across the cases where they are not growing above Rs 50 crores, as in that scenario they will be out of CGTMSE. The same is the case for many other schemes,” the letter read.
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Moreover, since investment in capital assets is one of the criteria for MSME classification, it discourages entrepreneurs from investing in technology upgradation or latest technology in plant and machinery impacting their revenue.
It is interesting to note that the classification of MSMEs based on investment in plant and machinery was proposed originally under the provisions of Micro Small and Medium Enterprises Development Act, 2006.