The Micro, Small and Medium Enterprises Development Act, 2006

Chapter III Classification of Enterprises, Advisory Committee and Memorandum of Micro, Small and Medium Enterprises

7. Classification of enterprises.-

1.      Notwithstanding anything contained in section 11B of the Industries (Development and Regulation) Act, 1951, the Central Government may, for the purposes of this Act, by notification and having regard to the provisions of sub-sections (4) and (5), classify any class or classes of enterprises, whether proprietorship, Hindu undivided family, association of persons, co-operative society, partnership firm, company or undertaking, by whatever name called,

a.      in the case of the enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951, as

                      i.         a micro enterprise, where the investment in plant and machinery does not exceed twenty-five lakh rupees;

                     ii.         a small enterprise, where the investment in plant and machinery is more than twenty-five lakh rupees but does not exceed five crore rupees; or

                    iii.         a medium enterprise, where the investment in plant and machinery is more than five crore rupees but does not exceed ten crore rupees;

a.    

b.     in the case of the enterprises engaged in providing or rendering of services, as

              i.         a micro enterprise, where the investment in equipment does not exceed ten lakh rupees;

a small enterprise, where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees; or

            iii.         a medium enterprise, where the investment in equipment is more than two crore rupees but does not exceed five crore rupees. Explanation 1. For the removal of doubts, it is hereby clarified that in calculating the investment in plant and machinery, the cost of pollution control, research and development, industrial safety devices and such other items as may be specified, by notification, shall be excluded. Explanation 2.It is clarified that the provisions of section 29B of the Industries (Development and Regulation) Act, 1951, shall be applicable to the enterprises specified in sub-clauses (i) and (ii) of clause (a) of sub-section (1) of this section.

2.      The Central Government shall, by notification, constitute an Advisory Committee consisting of the following members, namely:

a.      the Secretary to the Government of India in the Ministry or Department of the Central Government having administrative control of the small and medium enterprises who shall be the Chairperson, ex officio;

b.     not more than five officers of the Central Government possessing necessary expertise in matters relating to micro, small and medium enterprises, members, ex officio;

c.      not more than three representatives of the State Governments, members, ex officio; and

d.     one representative each of the associations of micro, small and medium enterprises, members, ex officio.

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3.      The Member-Secretary of the Board shall also be the ex officio Member-Secretary of the Advisory Committee.

4.      The Central Government shall, prior to classifying any class or classes of enterprises under sub-section (1), obtain the recommendations of the Advisory Committee.

5.      The Advisory Committee shall examine the matters referred to it by the Board in connection with any subject referred to in section 5 and furnish its recommendations to the Board.

6.      The Central Government may also seek the advice of the Advisory Committee on any of the matters specified in section 9, 10, 11, 12 or 14 of Chapter IV.

7.      The State Government may seek advice of the Advisory Committee on any of the matters specified in the rules made under section 30.

8.      The Advisory Committee shall, after considering the following matters, communicate its recommendations or advice to the Central Government or, as the case may be, State Government or the Board, namely:

a.      the level of employment in a class or classes of enterprises;

b.     the level of investments in plant and machinery or equipment in a class or classes of enterprises;

c.      the need of higher investment in plant and machinery or equipment for technological upgradation, employment generation and enhanced competitiveness of the class or classes of enterprises;

d.     the possibility of promoting and diffusing entrepreneurship in a micro, small or medium enterprises; and

e.      the international standards for classification of small and medium enterprises.

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9.      Notwithstanding anything contained in section 11B of the Industries (Development and Regulation) Act, 1951 and clause (h) of section 2 of the Khadi and Village Industries Commission Act, 1956, the Central Government may, while classifying any class or classes of enterprises under sub-section (1), vary, from time to time, the criterion of investment and also consider criteria or standards in respect of employment or turnover of the enterprises and include in such classification the micro or tiny enterprises or the village enterprises, as part of small enterprises.

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