The Reserve Bank of India vide its notification dated 2nd July 2020 has directed banks, financial institutions, and NBFCs to reclassify micro, small and medium enterprises on the basis of the new criteria.
As per the revised definition, an enterprise is micro where the investment in plant and machinery or equipment does not exceed Rs 1 crore and turnover does not cross Rs 5 crore and for small enterprise, the investment in plant and machinery or equipment does not exceed Rs 10 crore and turnover is not over Rs 50 crore and for medium enterprise, as per the new classification, the investment in plant and machinery or equipment should not exceed Rs 50 crore and turnover should be below Rs 250 crore.
The calculation of investment in the enterprises shall be done based on the ITR filed in the previous financial year. In case, the enterprise is a new enterprise, the calculation shall be done based on the self-declaration of the promoter and while calculating the turnover, the export of goods and services shall be excluded.
In case of an upward change in terms of investment in plant and machinery or equipment or turnover or both, and consequent re-classification, an enterprise will maintain its prevailing status till the expiry of one year from the close of the year of registration. In case of reverse-graduation of an enterprise, whether as a result of re-classification or due to actual changes in investment in plant and machinery or equipment or turnover or both, and whether the enterprise is registered under the Act or not, the enterprise will continue in its present category till the closure of the financial year and it will be given the benefit of the changed status only with effect from beginning of the financial year following the year in which such change took place.
Click here to read the notification.
