MCA’s press release for change in classification for MSMEs

Currently as per section 7 of Micro, Small & Medium Enterprises Development Act 2006, MSMEs are classified based on their investment in plant and machinery for manufacturing units and based on investment in equipment for service enterprises. Cabinet has approved the change in classification criteria from “investment in plant & machinery/equipment” to “annual turnover”.

Present Section 7 of MSMED Act,2006 has been attached for your ready reference; it will be amended to define units producing goods and rendering services in terms of annual turnover as follows :

• Enterprises having annual turnover less than or equal to Rs. 5 crores will be considered as Micro Enterprises.
• Enterprises having annual turnover more than Rs. 5 crores but not exceeding Rs. 75 crores will be considered as Small Enterprises.
• Enterprises having annual turnover more than Rs. 75 crores but not exceeding Rs. 250 crores will be considered as Medium Enterprises.

As per the announcements made by Finance Minister Arun Jaitley in Union budget 2018-19, all the companies having annual turnover not exceeding Rs. 250 crores in financial year 2016-17 will have to pay tax at reduced rate (25%) instead of current rate (30%). This benefit can be availed by all the MSMEs. Press release issued by MCA for the same has also been attached below.

Ministry of Finance

99% MSMEs to gain by Tax Incentives provided in General Budget 2018-19

Government to Forego Rs 7,000 Crores due to this incentive

Posted On: 01 FEB 2018 1:35 PM by PIB Delhi

The Union Minister for Finance and Corporate Affairs, Shri Arun Jaitley has proposed a reduced rate of 25% to companies that have reported turnover up to Rs 250 crores in financial year 2016-17. This will benefit the entire class of Micro, Small and Medium Enterprises which accounts for almost 99% of companies filing their tax returns. Accepting Rs 7,000 crores as the estimated revenue forgone due to this measure during the financial year 2018-19, the Finance Minister, while presenting the General Budget 2018-19 in Parliament here today, said, This is towards fulfillment of my promise to reduce corporate tax rate in a phased manner. He further added, The lower corporate income tax rate for 99% of the companies will leave them with higher investible surplus which in turn will create more jobs.
The Finance Minister recalled that in the Union Budget 2017, he had announced the reduction of corporate tax rate to 25% for companies whose turnover was less than Rs. 50 crores in financial year 2015-16. This had benefited 96% of the total companies filing tax returns. The Finance Minister also said that after this measure, out of about 7 lakhs companies filing returns, about 7,000 companies which file returns of income and whose turnover is above Rs.250 crores will remain in 30% slab.

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