"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
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.
HUF (Hindu Undivided Family)
Association of Persons
Limited Liability Partnerships (LLP)
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
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