Meta Description: Understanding MSME classification can come in handy for your business. You can enjoy several MSME benefits with this classification. Read on to learn more about this classification and the perks that come with it.
MSMEs or Micro, Small and Medium Enterprises have had a huge impact on the economy of India over the last five decades. They play a crucial role in boosting innovation and entrepreneurship, aiding in employment generation, contributing to GDP, and much more. Given their importance and contribution to the Indian economy, they are highly promoted and encouraged by the Government of India. The government assists, MSME loans, tax benefits, and much more. However, to avail of these benefits you must ensure you fall within one of the MSME classifications.
Classification of MSMEs
Based on the revised classification rules with effect from 1st of July, 2020, MSMEs were classified based on two criteria: annual turnover and investment in plant and machinery or equipment.
Here is the broad classification of MSMEs:
- Micro Enterprises
For micro-enterprises, the investment in plant and machinery/equipment shall not exceed ₹1 crore and the annual turnover should not go beyond ₹5 crore.
- Small Enterprises
For small enterprises, the investment in plant and machinery/equipment shall not exceed ₹10 crore and the annual turnover should not go beyond ₹50 crore.
- Medium Enterprises
For medium enterprises, the investment in plant and machinery/equipment should not be more than ₹50 crore and the annual turnover should not exceed ₹250 crores.
Understanding MSME Classification and Its Impact on Business
MSME classification makes it easy to identify industries based on their investment and turnover criteria. But how does this MSME classification help businesses? Here are some of the benefits that come with MSME classification:
- Easy Access to Capital
Once your business is classified as MSME, there are several benefits. One of the major benefits is easy access to capital. Your business becomes eligible for several government business loans, that are collateral-free, have easy repayment features, and much more. Thus, making it easier for your business to grow and expand.
- Marketing Assistance
Another prominent MSME benefit comes in the form of the government’s marketing support. With several government schemes like TREAD or Trade-related Entrepreneurship and Development, International Co-operation Scheme, and more, MSMEs are able to enjoy marketing assistance.
- Tax Benefits
MSMEs are also eligible to enjoy a variety of tax benefits. For example, reduced interest rates, some exemptions on GST, relief under the Start-up India scheme, etc.
- Procurement Preference
With MSME classification, you also get some benefits related to procurement. This means you enjoy procurement benefits under the e-marketplace of the government. This allows you to procure easily, create more profits, and grow more.
MSME Classification and Business Loans
With MSME classification not only your business enjoys benefits from several government programmes but much more. Your business is even preferred for business loans by banks and other institutions.
Here are some of the benefits of business loans that come with MSME benefits:
- The repayment options are more flexible
- The interest rates are competitive, and thus, an affordable option for MSMEs.
- With MSME status, your loans are quickly disbursed.
- You can also available of several collateral-free loans.
Bottom Line
MSMEs serve as the backbone of the Indian economy. From boosting local manufacturing to generating employment, innovation, and whatnot, MSMEs play a crucial role in India’s growth and development. The same is the reason why the Government carefully classifies MSMEs and provides them with a variety of benefits. All in all, the Growth and expansion of MSMEs is equivalent to the growth and development of the country’s economy.
