Revised Definition of MSME – Addition of Retail and Wholesale Trade

Ministry of Micro, Small, and Medium Enterprise (MSME) has announced a revised definition for MSMEs with the inclusion of retail and wholesale trades as MSMEs. With the revised guidelines the retail and wholesale trades will now be allowed to register on Udyam Registration Portal. The existing definition of MSMEs includes manufacturing and service enterprises whereas retail and wholesale trade was not classified under the same. Now under the revised guidelines, retail and wholesale trade will also get the benefit of priority sector lending under the Reserve Bank of India (RBI) guidelines. The current article briefs the New Definition of MSME.

Synopsis of Notification

As mentioned above, retail and wholesale trade were left out of the ambit of MSME. The government has also received various representations and it has been decided to include Retail and Wholesale trades as MSMEs and they are allowed to be registered on Udyog Registration Portal. However, benefits to Retail and Wholesale traders MSMEs are to be restricted to Priority Section Lending only.

Priority Sector Lending Benefit for Retail and Wholesale Trade

Retail and wholesale traders have been facing a severe liquidity crunch after sales were hit by the Covid-19 lockdowns. Considering this, MSME has issued the order to include retail and wholesale trade as MSME and extending to them the benefit of priority sector lending under RBI guidelines. Hence, the Reserve Bank of India (RBI) on July 07, 2021, has notified the new definition of micro, small and medium enterprises (MSMEs) by adding retail and wholesale trade to this category. The revised guidelines will benefit 2.5 Cr Retail and Wholesale Traders.

Other Benefits of adding Retail and Wholesale Trade under MSME

The benefit of adding Retail and Wholesale Trade in the MSME definition is as follows:

The revised guidelines will benefit 2.5 crore retail and wholesale traders.
The revised definition of MSME will help Retail and Wholesale Trade by giving better finance options for businesses that want to get structured.
It will give retail MSMEs the support they need to survive, revive and thrive.
The Covid pandemic-affected traders will now be able to restore their businesses by obtaining finances from banks, which was earlier denied to them.
Besides tax concessions, Udyam registered entities also have access to cheaper credit and ease in getting various business-related approvals.
Retail and Wholesale Trade can now be eligible to get loans from banks and financial institutions.
Retail and Wholesale traders will now be eligible for several government schemes.

Note: On June 28, the Finance Ministry increased the emergency credit line guarantee scheme (ECLGS) to Rs.4.5-lakh crore, mainly for the MSME sector Know more about the Emergency Credit Line Guarantee Scheme – ECLGS 4.0

Udyam Registration for Retail and Wholesale Trade

Ministry of Micro, Small and Medium Enterprises vide Office Memorandum (OM) No. 5/2(2)/2021-E/P & G/Policy dated July 2, 2021, has decided to include Retail and Wholesale trade as MSMEs for the limited purpose of Priority Sector Lending and they would be allowed to be registered on Udyam Registration Portal for the following NIC Codes and activities mentioned against them:

NIC Codes	Retail and Wholesale Trade
45	Wholesale and retail trade and repair of motor vehicles and motorcycles
46	Wholesale trade except for motor vehicles and motorcycles
47	Retail trade except for motor vehicles and motorcycles

The Enterprises having Udyog Aadhaar Memorandum (UAM) under the above three NIC Codes are now allowed to migrate to Udyam Registration Portal or file Udyam Registration afresh.

Eligible Entity for MSME Registration

Every type of business entity including one-man company, proprietorship, partnership firm, manufacturer, producer, limited company, private limited company, limited liability partnership firm, co-operative societies, any association of individuals, retailers, Hindu Undivided Family, or any other undertaking can get Udayam Registration. Now with Revised Guidelines for MSME, retail and wholesale trades will be allowed to register on Udyam Registration Portal. For more details on Udayam Registration, click here

Activities (NIC codes) not Covered for MSME registration

NIC Code	Activity
02	Forestry and logging
03	Fishing and aquaculture
97	Activities of households as employees for domestic personnel
98	Undifferentiated goods and services-producing activities of private households for their own use
99	Activities of extraterritorial organizations and bodies

Note: As per the new guidelines, the NIC codes – 45,46 & 47 have been excluded under this category.

Existing Definition of MSME

A revision in Micro Small and Medium Enterprises (MSME) definition was announced in the Atmnirbhar Bharat package on 13th May 2020. After the package was announced there were several representations for upward revision of the MSME definition. Hence, the Ministry of Micro, Small, and Medium Enterprises vide a notification dated 1^st June 2020 announced the upward definition and criteria of the MSME.

MSMEs are classified based on the composite criteria of investment in plant and machinery and turnover. The limit of the medium unit is revised upwards to Rs. 50 Crore of investment and Rs. 250 Crore turnover.
Exports will not be counted in terms of turnover for any enterprises whether micro, small or medium.
The Government had introduced a new composite formula for the classification of MSME. Accordingly, the ministry has removed the difference between the definition of manufacturing-based MSMEs and service-based MSMEs.
The existing criterion of the definition of MSME is based on the Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006 and it was different for manufacturing and services units.
The other change that had been introduced is that the turnover of the sector will define an MSME. The investments will not characterize an MSME, but the turnover will define an MSME.

Composite Criteria: Investment in Plant / Machinery
Sl.No	Type of Enterprises	Investment in Plant and Machinery or Equipment	Turnover
1	Micro enterprises	Less than Rs.1 Crore	Less than Rs.5 Crore
2	Small enterprises	Less than Rs.10 Crore	Less than Rs.50 Crore
3	Medium enterprises	Less than Rs.50 Crore	Less than Rs.250 Crore