New Delhi, July 24 (KNN) In the Lok Sabha session on Monday, bill intended  to change the criteria of classification of MSMEs from the existing based on 'investment in plant and machinery or equipment' to 'annual turnover' of the enterprise was introduced. 

The bill specifying the turnover of a business entity which classifies it as a micro, small or medium enterprise, was introduced in the Lok Sabha by Minister of State for MSMEs Giriraj Singh, after he withdrew the 2015 bill on the issue.

As per the amendments, any business with a turnover of up to Rs 5 crore would be considered as a 'micro enterprise'. A 'small enterprise' would be the one whose annual turnover is more than Rs 5 crore to Rs 75 crore and those with turnover over Rs 75 crore but upto Rs 250 crore would be deemed as a 'medium enterprise'.

The 2006 MSME Act was enacted to facilitate the promotion and development and enhancing competitiveness of MSMEs. 

The bill was modified in of the view that often business owners keep their investment sizes small, in order to retain the advantages of belonging to the MSME category.

The Criteria of classification based on 'investment in plant and machinery or equipment' also involves physical verification having associated transaction costs.

Therefore, after assessing multiple alternatives, it was decided that considering the annual turnover of a company would be the best option, as the income can be pegged with reliable figures available from the Goods and Services Tax (GST) Network, providing adequate information regarding the growth of a company.

“Overall, the turnover-based classification will promote the ease of doing business and will put in place a non discretionary transparent and objective classification system," the bill says.