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Re-classification of MSME criteria from investment to turnover will bring in more transparency: KDPMA

Nandita Vijay, Bengaluru
Monday, February 12, 2018, 08:00 Hrs  [IST]

The Karnataka Drugs and Pharmaceutical Manufacturers Association (KDPMA) sees that the Union government's effort to make a change in the criteria for classifying micro, small and medium enterprises (MSMEs) from investment in plant and machinery to annual turnover would make the process more transparent. It will align the MSMEs to the new tax regime revolving around GST (Goods & Services Tax).

The amendments to the Micro, Small and Medium Enterprises Development Act, 2006 were approved by the Cabinet chaired by Prime Minister Narendra Modi, on February 7.

For KDPMA a large chunk of its members represent the MSMEs segment. The new classification calls for companies having annual turnover less than or equal to Rs.5 crore fall under the 'micro' category. The enterprises having turnover between Rs.5 crore to Rs.75 crore will be classified as small enterprises, whereas those having turnover between Rs.75 crore and Rs.250 crore will be classified as medium enterprises.

This is a positive for all companies as it will make the process more transparent. In the pharma industry where the cost of plant and machinery is higher as compared to many other industries, this change in classification to turnover basis as compared to the investment basis is a good step. This is because many companies upto a turnover of Rs.250 crore could get the different benefits available to the MSME sector, Sunil Attavar, president, KDPMA, told Pharmabiz.

MSMEs are a major engine of growth and employment in the country. Massive formalization is taking place after demonetization and introduction of GST. Now the enormous financial information database will be used for improving financing of MSMEs’ capital requirement, including working capital. The classification is seen to encourage higher productivity, greater efficiency, improved competitiveness, and increased employment, stated the KDPMA president.

Further the change in classification will enhance the ease of doing business for MSMEs and bring in transparency. It will also pave the way for increased direct and indirect employment in the MSME sector in the country.

Many companies also viewed that the change in the MSMEs classification from investment in plant and machinery to turnover criteria is a major leap forward in the ease of doing business for MSMEs and a significant effort in synchronisation of business firms with GST.

 

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