Maharashtra: Notification on MSME criterion leads to confusion

At present MSMEs having an investment up to Rs 50 crore in land, plant and machinery have been included in the state’s PSI.

Even as the central government has further revised the criterion for defining micro, small and medium enterprises (MSMEs), a disparity in the cabinet note and the gazette notification has left industrialists confused.

Under the new definition, industries having an investment into plant and machinery up to Rs 50 crore and a turnover of Rs 250 crore will now come under the MSME segment. The press release following the cabinet meet also said that for counting the limits, the turnover in respect of exports will not be considered. So, the Rs 250 crore limit has to be only for domestic sales.

“However, the final notification does not have any mention of excluding the export turnover while calculating the limit,” said Julfesh Shah, a chartered accountant and project finance expert.

“The bureaucracy will always go by the notification that has followed the cabinet decision,” added Shah.

This has left many industrialists confused, according to Shah. “The gazette only has the fresh investment and turnover criterion,” he said.

A senior official in the MSME department also accepted that there was a lack of clarity. “Export turnover can involve substantial amount after conversion from exchange,” he said.

The fresh revision in criterion is expected to bring a major increase in the number of industries being classified as MSMEs in Vidarbha.

Sources say the state may have to take a call to whether include the new entrants into the MSME segment for the benefits under its package scheme of incentives (PSI). This is because it may lead to a substantial outgo of funds.

At present MSMEs having an investment up to Rs 50 crore in land, plant and machinery have been included in the state’s PSI. The scheme provides full refund of the gross liability towards the state goods and service tax (SGST) for period ranging from seven to 10 years.

Under the current definition industries up to an investment only in plant and machinery up to Rs 50 crore and a turnover of Rs 250 crore will be treated as MSMEs.

To provide tax refund to the new industries covered under the definition the state government will have to amend its industrial policy.

The state government shells out around Rs 4000 crore a year as SGST refund to all types of industries. The refund is available to large industries too but on the net SGST liability.

The state government will have to take a call considering its finances said a source.

Atul Pandey, the president of Vidarbha Industries Association (VIA), said despite the issues related to finer points, the revision in criterion is welcome as it was long pending.