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All about Micro, Small and Medium Enterprises (MSME)

April 4, 2018

 

 

 

 

 

 

"Think big, but start small".

 

Starting your business small, enables you to achieve a sustainable growth. Thanks to SMEs which boost the country's employment rate. SMEs contribute to 50% of the employment and 38% of National Income in  emerging economies.The Indian Government has introduced many schemes to promote SMEs by giving them lot of benefits like providing easy loans, waiving off fees, giving subsidies and exemptions. These benefits have actually made lot of youngsters and people from economically backward class to start their own entrepreneurial journey. Thousands of new entrepreneurs in India approach banks for loans to be on their own.

 

In order to classify an enterprise as small and medium enterprise, provisions of Micro Small and Medium Enterprises Development Act 2006 has to be applied. These provisions apply to enterprises engaged in production or manufacturing of goods or providing or rendering of services.

 

Section 7 classifies them into small and medium enterprise based on the value of plant and machinery the enterprises own. It is to be noted here that the classification is not based on turnover or paid up capital but based on the value of plant and machinery. When talking about the plant and machinery, all those machinery used for the purpose of the business are only included in calculating the value. The following machineries are excluded.                                                        

  • Pollution Control Equipment

  • R&D Equipment

  • Industrial Safety Devices

  • or any other machinery specified by notification

 

Your organization need not be a sole proprietorship to be classified as small and medium, it can be a corporate too. Following are the types of organizations which are classified as small and medium according to the Act.

 

  • Proprietorship

  • HUF (Hindu Undivided Family)

  • Association of Persons

  • Co-operative Societies

  • Partnership Firms

  • Limited Liability Partnerships (LLP)

  • Company

  • or Any other Undertaking specified from time to time

 

As discussed earlier, classifying enterprises into micro, small and medium depends on the value of plant and machinery for business involved in production and manufacturing. .

 

  • If the investment in plant and machinery is Less than Rs.25 Lakhs, it is classified as micro

  • Investment in plant and machinery from Rs.25 Lakhs to Rs.5 crore is categorized as small

  • and if the investment in plant and machinery is more than Rs.5 crore, but less than Rs.10 crores, it is categorized as medium.

 

For business involved in  providing or rendering of services, the classification would be based on the value of equipment.

 

  • If the investment in equipment is less than Rs.10 Lakhs, it is classified as micro

  • Investment in equipment from Rs.10 Lakhs to Rs.2 crores is categorized as small

  • If the investment in equipment is 2 crore to 5 crore, it is categorized as medium.

It is to be noted here that the value of plant and machinery is not the same as the value of equipment for classification.

 

Furthermore, only certain type of activities are covered under this Act. There are about 38 activities specified in Schedule I to the Act to which the provisions of the Act applies and few other activities are specifically excluded.

 

Here is the List of 38 Industries specified in Schedule I of Industries (Development and Regulation Act), 1951.  Check if your business activity is covered here.

 

1) Metallurgical Industry (includes ferrous metals like iron and steel and non-ferrous metals like gold and silver)

 

2) Fuels (includes coal, ignite coke, mineral oil, fuel gas)

 

3) Boilers and Steam generating plants

 

4) Prime Movers (Other than Electrical Generators)

 

5) Electrical Equipments ( includes electrical fans, electrical motors, household appliances etc)

 

6) Telecommunication Equipment (includes telephones, televisions, wireless communication apparatus)

 

7) Transportation (includes buses, ships, cars, motorbikes)

 

8) Industrial Machinery ( sugar, tea, jute machinery etc)

 

9) Machine Tools

 

10) Agricultural Machinery (tractors, harvestors etc)

 

11) Earth Moving Machinery (Earth Movers,excavators, road rollers etc)

 

12) Miscellaneous Mechanical and Engineering Industries (includes razor blades and pressure cookers)

 

13) Commercial Office and Household Equipments ( Type writers, vaccum cleaners, calculating machines, air conditioners etc) 

 

14) Medical and Surgical Appliances (Sterilizers, incubators etc)

 

15) Industrial Instruments ( Like water meter, steam meter and the like)

 

16) Scientific Instruments 

 

17) Mathematical Surveying and Drawing Equipments 

 

18) Fertilizers (Includes Organic, Inorganic and Mixed Fertilizers)

 

19) Chemicals other than fertilizers

 

20) Photographic Raw Film Paper

 

21) Dye Stuffs

 

22) Drugs and Pharmaceuticals

 

23) Textiles (including those dyed, printed or otherwise processed)

 

24) Paper and Pulp including Paper Products

 

25) Sugar

 

26) Fermentation and Industries

 

27) Food Processing Industries (includes, malted foods, milk foods and other food processing)

 

28) Vegetable Oils and Vanaspathi

 

29) Soaps, Cosmetics and Toilet Preparations (includes perfumes and glycerine)

 

30) Rubber Goods

 

31) Leather, Leather Goods and Pickers

 

32) Glue and Gelatin

 

33) Glass (includes optical glass, laboratory ware and miscellaneous ware)

 

34) Ceramics ( Fire bricks, refractories, sanitary ware tiles etc)

 

35) Cement and Gypsum Products

 

36)  Timber Products (Plywood, Hardboard etc)

 

37)  Defence Industries ( Arms and Ammunition)

 

38) Miscellaneous Industries

 

Did you find your business listed here? Get your business registered under MSME (Micro, Small or Medium Enterprises) or Udyog Aadhar today.to enjoy various benefits provided by the Government.

 

Check Out Other Related Topics

 

Sole Proprietorship Registration - Made Easy

Sole Proprietorship - Borrowing Loans from NRI

 

 

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