MSME India Guide for Foreign Investors: Classification, Support Schemes, Sector Opportunities

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June 06, 2023 Definition and classification criteria
The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 governs the coverage and investment ceiling of MSMEs in India.

Since July 1, 2020, a new definition of MSMEs has come into effect, focusing on their net turnover and net investments in essential assets such as plants, machinery, and equipment. This revised definition applies to both goods-based and service-based MSMEs, providing a comprehensive framework for classification.

Under the new definition, net investment refers to the difference between the investments made in pollution control, research and development, and the installation of safety devices, and the total investment in plant and machinery. This criterion ensures that MSMEs prioritize sustainable practices, innovation, and safety measures in their operations.

Net turnover, on the other hand, is determined by subtracting the export turnover from the total turnover of the MSME. This metric captures the domestic business activities and the extent of international trade for the enterprise.

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