What is MSME
Definition of MSME
Types of Business
Earlier MSME was referred to as Small Scale Industries (SSI). In the year 2006, Government of India in Parliament enacted the MSME Development Act 2006. MSME refers to Micro, Small & Medium Enterprises.
Most importantly, the term Industry has been replaced by the term Enterprise. Encompassing the Service sector which did not find any place in SSI. Click here to see the Enterprises under Service Sector. For Manufacturing Sector list encompassed under MSME Click here.
Definitions of MSME
In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified in two Classes:
(a) Manufacturing Enterprises- The enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the industries (Development and regulation) Act, 1951). The Manufacturing Enterprise are defined in terms of investment in Plant & Machinery.
(b) Service Enterprises: The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment.
(a) Manufacturing Enterprises- The enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the industries (Development and regulation) Act, 1951). The Manufacturing Enterprise are defined in terms of investment in Plant & Machinery.
(b) Service Enterprises: The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment.
The limit for investment in plant and machinery / equipment for manufacturing / service enterprisesare as under:
Manufacturing Sector | |
| Enterprises | Investment in plant & machinery |
| Micro Enterprises | Does not exceed twenty five lakh rupees |
| Small Enterprises | More than twenty five lakh rupees but does not exceed five crore rupees |
| Medium ....Enterprises | More than five crore rupees but does not exceed ten crore rupees |
Service Sector | |
| Enterprises | Investment in equipments |
| Micro Enterprises | Does not exceed ten lakh rupees: |
| Small Enterprises | More than ten lakh rupees but does not exceed two crore rupees |
| Medium ....Enterprises | More than two crore rupees but does not exceed five core rupees |
Some of the sectors are specifically reserved for MSME Sector. In these sectors Large Scale Companies cannot enter. This is done by the government to protect the interests of the micro & small enterprises. Owing to pressures after liberalization, the list is now shrinking . The list of enterprises exclusively reserved for MSME is available here.
It is now mandatory for Public Sector Undertakings to procure 20% of their purchases from MSME Sector following the implementation of Public Procurement Policy.
