The Karnataka Drugs and Pharmaceutical Manufacturers Association (KDPMA) sees that the Union government’s effort to make an amendment in the new criteria for classifying micro, small and medium enterprises (MSMEs) from investment in plant and machinery to annual turnover would make the process more transparent.
It will arrange the MSMEs to the new tax regime revolving around GST (Goods and Services Tax). The change to the Micro, Small and Medium Enterprises Development Act, 2006 were approved by the Cabinet chaired by Prime Minister Narendra Modi, on February 7. For KDPMA a large chunk of its members represents to the MSMEs segment.
The new classification calls for companies having an annual turnover not exactly or equivalent to Rs.5 crore fall under the ‘micro’ category. The enterprises having a turnover between Rs.5 crore to Rs.75 crore will be classified as small enterprises, while those having turnover between Rs.75 crore and Rs.250 crore will be classified as medium enterprises.
This is a positive for all organizations as it will make the process more transparent. In the pharma industry where the cost of plant and machinery is higher as compared to many other industries, this change in classification to turnover basis when compared with the investment basis is a good step.
This is because many companies up to a turnover of Rs.250 crore could get the different advantages available to the MSME sector, Sunil Attavar, the president, told. MSMEs are a major engine of development and work in the country.
Massive formalization is occurring after demonetization and introduction of GST. Presently the enormous financial information database will be utilized for enhancing financing of MSMEs’ capital necessity, including working capital.
The classification apparently encourages higher productivity, greater efficiency, improved competitiveness, and increased employment, stated the KDPMA president.
Further, the change in classification will improve the ease of working together for MSMEs and bring in transparency. It will also make ready for increased direct and indirect employment in the MSME sector in the nation.
Many companies also saw that the change in the MSMEs classification from investment in plant and machinery to turnover criteria is a major leap forward in the simplicity of working together for MSMEs and a significant effort in synchronization of business firms with GST.