MSMEs are the backbone of the Indian economy; they are one of the largest employment generators and contribute roughly about 35% to the GDP.

Recently the Government has shifted its focus on this micro, small and medium enterprises and have developed various schemes and measures to enhance their growth.

After 14 years since the MSME Development Act came into existence in the year 2006, a revised definition of MSME was announced in the Aatmanirbhar Bharat package on May 13, 2020.

As per the revised definition, an enterprise is a micro where the investment in plant and machinery or equipment does not exceed Rs 1 crore and turnover does not cross Rs 5 crore.

A small enterprise is the one where the investment in plant and machinery or equipment does not exceed Rs 10 crore and turnover is not over Rs 50 crore.

For the medium enterprise, as per the new classification, the investment in plant and machinery or equipment should not exceed Rs 50 crore and turnover should be below Rs 250 crore.

To ensure that the concessions given by the government to the MSME are not misused, the Income Tax department will soon start sharing data related to depreciation, sales, and gross turnover of micro, small and medium enterprises with the MSME Ministry

Section 138 of Income Tax Act empowers income tax authorities to share information/ details of its taxpayers with other government agencies, as may be notified.

Earlier there was no annual verification of the MSME status from the department. The CBDT data will enable the Ministry of MSME to check and classify enterprises in the MSME category as per the criteria notified by the government.

This exchange of information will ensure that only those entities will qualify as MSME under new rules, which have prescribed investment in plant & machinery and turnover as reported in their ITR. Information will also be used to ascertain the cash flow of MSMEs and ensure that the benefits and sops go to those companies that are within the ambit of MSMEs and not to those companies that continue to enjoy MSME status despite having surpassed the earlier parameter based on investment limit in plant and machinery and Turnover.


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April 2021