The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 on June 16, 2006 which was notified on October 2, 2006. With the enactment of MSMED Act 2006, the paradigm shift that has taken place is the inclusion of services sector in the definition of Micro, Small and Medium Enterprises, apart from extending the scope to Medium Enterprises.
The MSME registration is not statutory. However, the MSME registration process in India has been conceptualized to provide maximum benefits to all types of enterprises. After registration, any enterprise becomes qualified to reap the benefits offered under the MSMED Act. Some of the benefits from Central Government include easy sanction of bank loans (Priority sector lending), lower rates of interest, excise exemption scheme, exemption under Direct Tax Laws and statutory support such as reservation and the interest on Delayed Payments Act.
Micro Enterprises: These are the smallest entities, of course. Micro manufacturing enterprises have investment of less than Rs. 25 lakh in plant and machinery, while micro service enterprises have less than Rs. 10 lakh invested in equipment.
Small Enterprises: Small manufacturing enterprises may have between Rs. 25 lakh and Rs. 5 crore invested in plant and machinery, while small service enterprises may have between Rs. 10 lakh and Rs. 2 crore invested in equipment.
Medium Enterprises: Medium manufacturing enterprises may have between Rs. 5 crore and Rs. 10 crore invested in plant and machinery, while small service enterprises may have between Rs. 2 crore and Rs. 5 crore invested in equipment.