The Micro, Small and Medium Enterprises Development (MSMED) Act was introduced in June 2006. It received the President’s assent on June 16, 2006, and came into effect on October 2, 2006. The Act was designed to address policy issues affecting MSMEs and to facilitate their growth and development. It also provides the legal framework for the recognition and classification of micro, small, and medium enterprises in India.
The Act consolidates various laws related to MSMEs and aims to promote competitiveness, enhance support services, and provide a single legal framework for the sector.
The MSMED Act classifies enterprises into three main categories based on their investment in plant and machinery (for manufacturing) or investment in equipment (for services):
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Micro Enterprises:
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Manufacturing: Investment in plant and machinery does not exceed ₹1 crore.
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Services: Investment in equipment does not exceed ₹50 lakh.
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Small Enterprises:
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Manufacturing: Investment in plant and machinery is between ₹1 crore and ₹10 crore.
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Services: Investment in equipment is between ₹50 lakh and ₹2 crore.
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Medium Enterprises:
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Manufacturing: Investment in plant and machinery is between ₹10 crore and ₹50 crore.
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Services: Investment in equipment is between ₹2 crore and ₹5 crore.
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