Definitions of Micro, Small & Medium Enterprises 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:

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) or employing plant and machinery in the process of value addition to the final product having a distinct name or character or use. The Manufacturing Enterprise is defined in terms of investment in Plant & Machinery.

Service Enterprises:-The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment..

“The definition being changed is done in the favour of MSMEs. There has always been this fear, among successful MSMEs also, that if they outgrow the size of what has been defined as an MSME, they will lose their entitled benefits. This is why MSMEs like to remain within the definition rather than grow. With the revised definitions of MSMEs, they will not have to worry about growing their size and can still avail benefits,” Finance Minister Ms. Nirmala Sitharaman said.


1. Earlier scenario (till 13th May 2020): Classification of MSMEs have been done based on investments in plant and machineries.

MSME are classified into two categories:

a. Manufacturing enterprise; and

b. Service enterprise.





Manufacturing Enterprises

25 lakhs

less than 50 lakhs

less than 1 cr.

Service Enterprises

less than 10 lakhs

less than 20 lakhs

less than 50 lakhs

2. Current Scenario (from 14th May 2020): Classification of MSMEs have been done based on investments in plant and machineries and Turnover and now there is no distinction between manufacturing enterprise and service enterprises.





Manufacturing & Services enterprises

Investment less than 1 cr. and

Turnover less than 5 cr.

Investment less than 10 cr. and

Turnover less than 50 cr.

Investment less than 20 cr. and

Turnover less than 100 cr.


To promote e-Governance for empowering citizens, promoting the inclusive and sustainable growth of the Electronics, IT & ITeS industries, enhancing India’s role in Internet Governance, adopting a multipronged approach that includes development of human resources, promoting R&D and innovation, enhancing efficiency through digital services and ensuring a secure cyber space.


e-Government: Providing e-infrastructure for delivery of e-services

e-Industry: Promotion of electronics hardware manufacturing and IT-ITeS industry

e-Innovation / R&D: Implementation of R&D Framework – Enabling creation of Innovation/ R&D Infrastructure in emerging areas of ICT&E/Establishment of mechanism for R&D translation

e-Learning: Providing support for development of e-Skills and Knowledge network

e-Security: Securing India’s cyber space

e-Inclusion: Promoting the use of ICT for more inclusive growth

Internet Governance: Enhancing India’s role in Global Platforms of Internet Governance.


Micro, Small and Medium Enterprises (MSME) Registration provides benefit to the individual/companies who fall under the investment limit decided by the Government. The registration is meant for the entities dealing in the manufacturing or service sector.

Any business entity (sole proprietorship, partnership, OPC etc.) can apply for the msme certificate, however; there are different investment limits for the applicants. It is also known as Udyog Aadhar Registration and can be done in both online and offline mode.


1. Collateral Free loans from banks:

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS) was launched by the GOI to make available collateral-free credit to the micro and small enterprise sector. Both the existing and the new enterprises are eligible to be covered under the scheme. The Ministry of Micro, Small and Medium Enterprises, Government of India and Small Industries Development Bank of India (SIDBI), established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises.

2.Subsidy on Patent Registration

Enterprises that have MSME Registration Certificate can avail 50% subsidy for patent registration by making application to respective ministry.

3. 1% exemption on interest rate on overdraft

Enterprises that have MSME Registration can avail benefit of 1% exemption on interest rate on OD as mentioned in the scheme (this is bank dependent).

4. Eligible for Industrial Promotion subsidy

Enterprises that have MSME Registration are eligible for Industrial Promotion Subsidy as may be prescribed by the government in this behalf.

5. Protection against delayed payments

At times, the buyers of services or products from the MSME’s or SSIs tend to delay the payment. The Ministry of Micro, Small and Medium Enterprise lend a helping hand to such enterprises by giving them the right to collect interest on the payments that are delayed from the buyer’s side. The settlement of such disputes must be done in minimum time through conciliation and arbitration.

In case, if any MSME registered enterprise supplies any goods or services to a buyer then the buyer is required to make the payment on or before the agreed date of payment or within 15 days from the day they had accepted the goods and services from MSME or SCI registered business( if there is no mention of the date of payment).

If the buyer delays the payment for more than 45 days after accepting the products or services then the buyer has to pay compound interest along with interests (monthly) on the amount that was agreed to be paid. The interest rate is three times the rate that is notified by the Reserve Bank of India.

6. Fewer Electricity Bills

Enterprises that have MSME Registration Certificate can avail Concession on electricity bill by making application to electricity department along with MSME Registration Certificate.

7. ISO Certification Charges Reimbursement

The registered MSME enterprises can claim the reimbursement of the expenses that were spent for the ISO certification.


All the documents and forms are filed online only. The applicant needs to submit scanned copies of the following documents –

  • Aadhar and PAN Card.
  • Address Proof (Business)
  • Registration Proof (Business)
  • Sale and Purchase Bills
  • Licenses (Industrial license)


1. Collateral-free automatic loan which have 4 years tenor with moratorium of 12 months on principal repayment.

2. Subordinate Debt for Stressed MSMEs to be provided.

3. Equity infusion for MSMEs with growth potential through fund of funds model.

4. Definition of MSME to be revised to increase investment and turnover limit to expand the coverage (already discuss in classification of MSME).

For more detail you can contact us at [email protected]


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My self Ambika Sharma a practicing company secretary, having 7 years of working experience in the field of Company Law, Stock exchange compliance, Revocation from stock exchanges, Income tax return, GST registration etc View Full Profile

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February 2021