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New MSME classification to create a level playing field: FICCI

New Delhi, 9 February 2018:

FICCI has welcomed the Central Government's decision to change the criteria of classification of micro, small and medium enterprises (MSMEs) from ‘Investment in plant & machinery and equipment’ to ‘annual turnover’. The decision will scrap the long-pending MSME Amendment Bill 2015 in Lok Sabha under which it was proposed to increase the upper ceiling of investment in plant & machinery and equipment.

FICCI has been long advocating the need to have annual turnover based definition for MSMEs as it will bring them in alignment with universal definition and hence easier to create business linkages with global counterparts. “Turnover based criteria also helps bring alignment in definition across sectors and will create a level playing field, said Rashesh Shah, President, FICCI.

MSME are run generally by a single proprietor and their key stakeholders include family or relatives. There is a thin line of differentiation between private and business assets of MSMEs and hence they are not able to assess what is to be included or excluded while calculating their investment in assets.

“The change in the norms of classification will certainly improve 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 of the country," added Shah.

Meanwhile, the Reserve Bank of India (RBI) has also announced various measures for MSMEs hit by the implementation of Goods and Services Tax (GST) by giving them additional up to 180 days to clear their dues to banks. FICCI has hailed this move as well.

RBI has extended the NPA period upto 180 days from the existing 90 days for MSMEs registered under GST with aggregate standard exposure up to Rs 25 crore and amount overdue as on September 2017 to make payment of loans to their creditors including banks and NBFCs. Shah pointed out that this move will help in the cash flow and may result into reducing the MSME NPAs.

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