This issue of LexCognito, which in Latin means 'awareness about law', seeks to provide you an insight into significant legal and regulatory developments that have taken place very recently in India.
Date: 3 June 2020
New MSME Definition will cover Larger Pool of Industries in the segment – effective from 1 July
In order to bolster the revival of industries in micro, small and medium enterprises (MSME) segment from the present crises, the Government of India had announced slew of measures and economic relief package in the form of a Rs 20,000-crore fund to provide equity support to stressed entities in the sector, and equity infusion of Rs 50,000 crore into MSMEs through a fund of funds. As part of the economic stimulus package, the criteria for classification of industries under MSME segment has been revised to cover larger pool of industries in the segment allowing them to reap the announced benefits.
The Ministry of Micro, Small and Medium Enterprises, vide its notification dated 01 June 2020, has revised the criteria for defining MSMEs with prospective effect from 01 July 2020. Under the new definition, the distinction between manufacturing and service enterprises has been done away with. Further, the investment limit has been increased and an additional criteria of turnover has been introduced.
The Finance Minister had earlier announced the increased limit of a ‘medium’ unit as Rs. 20 crore of investment and Rs. 100 crore of turnover as part of economic stimulus package, which has now been further increased to Rs. 50 crore of investment and Rs. 250 crore of turnover. Hence, enterprises with up to Rs 50 crore investment and upto Rs 250 crore turnover will now be classified as a ‘medium’ enterprise. It has also been decided that export turnover will not be a part of the definition and therefore will not be counted in the limits of turnover for any category of MSME units. The revised criteria for all categories in comparison with the earlier one has been summarized herein below:
EARLIER CRITERIA
REVISED CRITERIA
MICRO
Manufacturing Enterprises
Investment upto Rs. 25 lakh
Manufacturing AND Service Enterprises
Investment upto Rs. 1 cr. AND
Annual Turnover upto Rs. 5 cr.
Service Enterprises
Investment upto Rs. 10 lakh
SMALL
Manufacturing Enterprises
Investment upto Rs. 5 Crore
Manufacturing AND Service Enterprises
Investment upto Rs. 10 cr.
AND
Annual Turnover upto Rs. 50 cr.
Service Enterprises
Investment upto Rs. 2 Crore
MEDIUM
Manufacturing Enterprises
Investment upto Rs. 10 Crore
Manufacturing AND Service Enterprises
Investment upto Rs. 50 cr.
AND
Annual Turnover upto Rs. 250 cr.
Service Enterprises
Investment upto Rs. 5 Crore
Under the Micro, Small and Medium Enterprises Development Act, 2006, the MSMEs are entitled to receive their dues within 15 days (or mutually agreed date not exceeding 45 days) from the date of acceptance of goods or services by the buyer. In case the buyer fails to make timely payment, the buyer is liable to pay compound interest on that amount from the day of acceptance at three times of the bank rate notified by the Reserve Bank of India. In case of non-payment, a reference can be made to the Micro and Small Enterprise Facilitation Council (MSEFC) and the dispute shall be decided within 90 days from the date of making such reference.
Given the revised framework, it is incumbent upon the corporates to identify their vendors who will also be classified under MSME segment now and device modalities to manage risk and avoid defaults.
Chambers of Rajan & Indraneel
T: +91 11 41000224, 41030225| Fax:+91 11 29239074
E-mail:rajan.gupta@chrilegal.com
Mobile: +91 9810404086
N 103 Greater Kailash - I, New Delhi - 110048, India.
About us
Chambers of Rajan & Indraneel is a premier full service law firm headquartered at New Delhi, India. The Firm represents amalgamation of vast experiences and practices of two eminent lawyers. Indranil Ghosh is highly reputed as a disputes lawyer. He was a senior partner and head of litigation practice in one of the oldest Indian law firm Fox Mandal for several decades before setting up his own practice. Rajan D Gupta is a rank holder Chartered Accountant turned Corporate Lawyer. He is also a licensed Insolvency Resolution Professional. He has been associated with internationally renowned big law firms in past and has held senior level positions in firms like PwC, Fox Mandal, Khaitan & Co. and SRGR Law, etc. before starting the Firm.
We have a team of experienced Lawyers, Chartered Accountants, Company Secretaries and Insolvency Resolution Professionals with access to network of high quality experienced lawyers in all major commercial cities of India.
The Firm offers a wide range of expert legal services in the areas of corporate and commercial laws and specializes in representing major foreign and domestic corporations with diverse business interests in India. The Firm is professionally equipped to handle large sized and complex corporate transactions like Mergers & Acquisitions, Corporate Restructuring, Joint Ventures, Inbound & Outbound Investments, Private Equity and Venture Capital Investment Transactions, Real Estate Transactions, Infrastructure Projects, Project Finance, Power Projects, Non-Conventional Energy Projects, Highways & Road Projects and Corporate Taxation as well as GST, etc. The Firm also offers proven capabilities in litigation and dispute resolution practice areas, especially in handling international and domestic arbitrations as well as litigation in Supreme Court, various High Courts of India and various judicial and quasi-judicial tribunals/forums including at National Client Law Tribunal, Appellate Tribunals, Tax Tribunals, Competition Commission, Electricity Tribunal, Telecom Disputes Tribunal, Designated Authorities and other adjudicatory bodies.
We have set up a Japan Business Desk (JBD) in order to serve our Japanese clients in a better way. The endeavour of JBD is to act as a bridge between our professionals and clients from Japan so as to ensure that there are no barriers as to linguistic and cultural differences. This will indeed facilitate Japanese corporates doing business in India.
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