Overriding Clarification on Classification of Manufacture & Service Industries under Micro Small Medium Enterprises Act issued by MSME Ministry

Categorisation of activities under manufacture or service under the MSMED Act, 2006

This always remained as a moot point, while categorising under MSMED Act, which provides different limits (link) for manufacturing and servicing industries.

Now, the Ministry of Micro, Small & Medium Enterprises has given a CLARIFICATION in supersession of all other circulars that:

A)    Activities considered as manufacturing :

1. (i)                  Medical Equipment and Ayurvedic Product
2. (ii)                Composite unit of Bacon Processing and Piggery Farm (Piggary Farm without bacon processing shall not be classified either as manufacturing or as service enterprise because this is farming activity)
3. (iii)               Tobacco Processing
4. (iv)              Beedi/ Cigarette manufacturing and other tobacco products
5. (v)                Extraction of Agave Spirit from Agave juice (imported medicinal plant) extraction of Agave
6. (vi)              Manufacture of Bio-fertilizer

B)     Activities considered as Service :

1. (i)                  Sanitation Services (Hiring of Septic Tank Cleaner)
2. (ii)                Clinical Pathological Laboratories and scanning, MRI Tests
3. (iii)               Hospitals
4. (iv)              Agri – clinic and Agri – Business
5. (v)                Restaurants with Bar
6. (vi)              Canteens
7. (vii)             Motel industry

The activity “Bee Keeping” is a farming allied activity and therefore, would not be covered in either manufacturing or service activity.

Source: No.5(6)/2/2009-MSME POL dated 21/07/2009

As you know [MSMED]Small Scale Industry definition only under MSMED Act for IDRA too.

To understand all the notifications of industry, read Industries DIPP updates

Manufacturing Enterprise is same as Industry or Industrial Undertaking (SSI) as the Act uses enterprise for both manufacturing & service – MSME Clarifies

The Micro, Small and Medium Enterprises Development Act, 2006 (MSMED) uses the terminology enterprise for the establishments engaged in manufacturing sector as well in service sector.  Therefore, the present terminology “manufacturing enterprise” should be considered as equivalent to the term “industry” or industrial undertaking”, which was used earlier in the definition of Small Scale Industries (SSI).  The establishment engaged in services are termed as “Service Enterprises” in the MSMED Act, 2006.

Source: 16(20)/1/2009-MSME POL dated 5th November 2009

As you know [MSMED]Small Scale Industry definition only under MSMED Act for IDRA too.

To understand all the notifications of industry, read Industries DIPP updates

Now, read in mail Subscribe to Blog

Priority lending to Training centres & consultancy services registered as Micro or Small enterprise – RBI instructs banks

Priority Sector Lending – Categorisation of activities under service under the Micro Small & Medium Enterprises Development (MSMED) Act, 2006

Understand the broad CATEGORIES OF PRIORITY SECTOR,
(i) Agriculture (Direct and Indirect finance)
(ii) Small Enterprises (Direct and Indirect Finance)
(iii) Retail Trade
(iv) Micro Credit
(v) Education loans
(vi) Housing loans

Understand about MSMED from http://yehseeyes.blogspot.com/search?q=MSMED

It has been decided to include loans granted by banks in respect of following activities under Micro and Small (Service) Enterprises within the priority sector, provided such enterprises satisfy the definition of Micro and Small (Service) Enterprises in respect of investment in equipment (original cost excluding land and building and furniture, fittings and other items not directly related to the service rendered or as may be notified under the MSMED Act, 2006) (i.e. not exceeding Rs. 10 lakh and Rs. 2 crore respectively).

1. Consultancy Services including Management Services;
2. Composite Broker Services in Risk and Insurance Management;
3. Third Party Administration (TPA) Services for Medical Insurance Claims of Policy Holders;
4. Seed Grading Services;
5. Training-cum-Incubator Centre;
6. Educational Institutions;
7. Training Institutes;
8. Retail Trade;
9. Practice of Law, i.e. legal services;
10. Trading in medical instruments (brand new);
11. Placement and Management Consultancy Services; and
12. Advertising agency and Training centres

Accordingly, there will be no separate category for "Retail Trade" under priority sector. Loans granted by banks for Retail Trade [i.e. advances granted to retail traders dealing in essential commodities (fair price shops), consumer co-operative stores; and advances granted to private retail traders with credit limits not exceeding Rs. 20 lakh) would henceforth be part of the Small (Service) Enterprises.

The commercial banks may report such loans under the head "Total credit to Small Enterprises" in the half-yearly (Ad-hoc) [under 2 (a) and 2 (ii)] and yearly (final) [under 14, 15, 19, 20 and 21] return on priority sector advances.

For All Primary (Urban) Co-operative Banks (read this circular UBD.CO.BPD(PCB) Cir.No.50/09.09.001/2009-10 dated March  25, 2010)

Source: RBI/2009-10/164 RPCD.CO.Plan.BC. 24 /04.09.01/2009-10 dated 18th September 2009

Publishing, Printing – manufacture/service under Micro Small Medium Enterprises (MSMED) Act,2006 clarified

Categorisation of activities under manufacture or service under the MSMED Act, 2006

Whether Printing is a manufacture / service?  Whether Publishing is manufacture or service?

This always remained as a moot point, while categorising under MSMED Act, which provides different limits (link) for manufacturing and servicing industries.

Now, the Ministry of Micro, Small & Medium Enterprises has clarified that,

Manufacturing –

• Printing OR
• Printing & Publishing, as an integrated unit.

Service – Publishing.

Thus publishing per se is not manufacturing unless printing is also involved.  Printing per se is manufacturing.  Publishing per se is service.

Source: No.5(6)/2/2009-MSME POL dated 08/05/2009

As you know [MSMED]Small Scale Industry definition only under MSMED Act for IDRA too.

To understand all the notifications of industry, read Industries DIPP updates

Now, read in mail Subscribe to Blog

[MSMED]Small Scale Industry definition only under MSMED Act for IDRA too

Small Scale & Ancillary Industry becomes Small or Medium Enterprise even for the purpose of IDRA.

Rescinding of Notification No.857(E) dated 10 December, 1997

The above said notification lists the factors on the basis of which an industrial undertaking shall be regarded as a small scale or as an ancillary industrial undertaking for the purposes of Industries (Development and Regulation) Act, 1951 (IDRA).  It is the impact of Micro, Small & Medium Enterprises Development Act, 2006, the said notification was rescinded.  Read about MSMED Act in http://yehseeyes.blogspot.com/2007/11/micro-small-and-medium-enterprises.html

The central Government considers it necessary with a view to ascertain which ancillary and small scale industrial undertakings need supportive measures, exemption or other favourable treatment under the Industries (Development and Regulation) Act, 1951 (65 of 1951) herein after referred to as the said Act) to enable them to maintain their viability and strength so as to be effective in –

1. promoting in a harmonious manner the industrial economy of the country and easing the problem of unemployment, and

2. securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good.

& for which purpose has rescinded the above said notification vide Notification SO. 563(E) dated 27th February 2009.

Consequently even the format of Industrial Entrepreneurial Memorandum (IEM) got amended, which now reads instead for IDRA – enterprise for goods pertaining to Schedule-I industry or employing plant & machinery as value addition to final product with distinct name/character/use. Find the said amendment in http://www.laghu-udyog.com/publications/circulars/GazNot/SO-199(E).pdf

Keep tracking Industries amendment using Industries DIPP updates

Print your Entrepreneurs Memorandum (EM) Number, to get identified as Micro & Small Enterprise

Whether Schedule VI Update of Companies Act is followed in Spirit ?

Apprehensions have been expressed that in the absence of the identification of MSE Supplier on its supply order/ invoices and other documents may leave a scope for the buyer to omit their mention in the annual statement of accounts. The auditors while auditing the annual accounts may not be able to deduct such omissions from the available documents because of non-availability of identification. In terms of the provisions of MSMED Act, 2006, the MSE supplier is defined as under:

“As per Section 2(a)(ii)(n) of the MSMED Act, 2006 the “supplier” means a micro or small enterprise, which has filed a memorandum with the authority referred to in sub-section (1) of section 8. “

So, What Now ?

It is considered advisable that the Micro and Small Enterprises should mention/ get printed on their letter heads, supply order sheets, invoices, bills and other relevant documents, the Entrepreneurs Memorandum (EM) Number {as allotted after filing of the said Memorandum, by the District Industries Centre (DIC) or competent authority, as notified by their respective State Government/ UT administration}, so that there always remains an identification of being a MSE supplier.

 

This may please be brought to the knowledge of all micro and small enterprises, through respective Micro and Small Enterprises Associations in your State/ under your jurisdiction or all other possible means for creating awareness and sensitisation of micro and small enterprises on this issue, under intimation to this office, so that the provisions of Section 22 and Section 23 of the MSMED Act, 2006 are implemented in letter and spirit.

 

MSME No.2(18)/2007-MSME (pol) dated 26-08-2008

 

Understand Micro, Small & Medium Enterprises Act, 2006 here.

Micro, Small and Medium Enterprises Development Act, 2006

Thanks to my Guru V.S. Datey for this article on MSMED Act,

Micro and small enterprises

As per section 7 of Micro, Small and Medium Enterprises Development Act, 2006 (which is effective from 2-10-2006) read with notification No. SO 1642(E) dated 29-9-2006, enterprises are classified as follows –

PARTICULARS	Investment in plant and machinery in case of enterprise engaged in manufacture or production of goods	Investment in equipment in case of enterprise engaged in providing or rendering of service
Micro Enterprise	Does not exceed Rs 25 lakh Rupees	Does not exceed Rs 10 lakh Rupees
Small Enterprise	More than Rs 25 lakhs but does not exceed Rs five crores	More than Rs 10 lakhs but does not exceed Rs two crores
Medium Enterprise	More than Rs 5 crore but does not exceed Rs 10 crores	More than Rs 2 crore but does not exceed Rs five crores

The enterprise may be proprietorship, HUF, AOP, cooperative society, partnership or undertaking or any other legal entity - Notification No. SO 1642(E) dated 29-9-2006.

While calculating value of plant and machinery, cost of pollution control, research and development, industrial safety devices and other items as may be specified by notification, shall be excluded. Mode of calculation of value of plant and machinery has been specified in notification No. S.O. 1722(E) dated 5-10-2006, issued by Ministry of SSI. Broadly, cost of toolings, erection and commissioning charges, electrical installations etc. is to be excluded. Second hand machinery is to be valued at price of new machinery.

It is clarified that section 29B of IDRA (which provides for reservation for small industries) will be applicable to enterprise engaged in manufacture, where investment is upto Rs five crores.

As per section 8 of Micro, Small and Medium Enterprises Development Act, 2006 (which is effective from 2-10-2006), micro or small enterprises may, at his discretion file a memorandum with authority prescribed by State Government. A medium enterprise engaged in manufacture or production of goods specified in industry specified in first schedule to IDRA shall file memorandum with authority as specified by Central Government.

The memorandum shall be filed by a medium enterprise engaged in production of goods with General Manager, District industries Centre or any District Level officer of equivalent rank in the department of State Government dealing with Micro, Small and Medium Enterprises (SO No. 1636(E) dated 29-9-2006).

National Board for Micro, Small and Medium Enterprises has been formed vide notification No. GSR 596(E) dated 26-9-2006. Advisory committee for classification of enterprises has been formed vide notification No. SO 1622(E) dated 27-9-2006.

Reservation for small industries – The list of industries reserved for SSI is being pruned. Items reserved for SSI as on 13-3-2007 were 114. Mostly there are low technology items and very few may be of interest to large industries. List is available on following website -

http://www.smallindustryindia.com/publications/reserveditems/Reserved_item_list_114_items.pdf

Also find the Act's Financial Implications in
http://thisisvj.googlepages.com/microsmallmedium.doc

Note on MSMED Act http://thisisvj.googlepages.com/NoteonMSME.doc

Format of letter to be recieved from Suppliers http://thisisvj.googlepages.com/ConfirmationLetterfromsuppliers.doc

Valuable SME Toolkit avail in http://india.smetoolkit.org/

Government site http://www.msme.nic.in/

Yes, this will help you in Company Secretary Final & Inter preparations and other professionals.