New Delhi, Dec 31 (KNN) Micro, Small and Medium Enterprises (MSMEs) should be classified according to their annual turnovers instead of investments in plant and machinery.  This was suggested by a parliamentary panel in a report.

“Taking into consideration the views of majority of the stakeholders and the arguments put forth by the MSMEs Ministry, the committee feels that instead of the current classification based on investment in plant and machinery/equipment, the MSMEs could be classified based on their annual turnover,” according to a report by the department-related parliamentary standing committee on industry.

It was tabled in the Lok Sabha.

"The committee, therefore, desires that the ministry may make all-out efforts to obtain increased budget allocation for the sector," it added.

The report said that with the proposed change in the classification, it is more likely that a large number of enterprises would come under the Ministry.

The present classification based on investment in plant and machinery has a number of disadvantages as it prevents MSMEs to become competitive in the market, report said.

Report added that it also inhibits investment to modernize, upscale, improve productivity and technology up gradation due to rigor of investment threshold.

“Taking turnover as criteria should overcome these shortcomings "as it can be pegged with reliable data available in GST Network," it added.

The ministry has also proposed similar way to classify MSMEs in the MSMEs Development (Amendment) Bill, 2018.