Everything you need to know about investment and turnover calculation in MSME

9 January, 2023

The Ministry of Micro, Small, and Medium Enterprises (MSME) is the backbone of the Indian economy. These small businesses have shaped the country's growth and progress for years and will continue to do so for the times to come.

In 2020, the government had released the criteria to calculate the investment and turnover for MSMEs. Let’s find out more about this and the method to calculate a company’s investment and turnover.

Classification of MSME companies based on investment and turnover:

Type of enterprise

Investment in plant and machinery or equipment

Annual turnover

Micro enterprise

Equal to or less than ₹1 crore

Equal to or less than ₹5 crore

Small enterprise

Equal to or less than ₹10 crore

Equal to or less than ₹50 crore

Medium enterprise

Equal to or less than ₹50 crore

Equal to or less than ₹250 crore

Criteria for calculation of investment and turnover in MSME

Here are some things to note:

  • The government announced that all companies under MSME would be classified based on these figures.

  • If a company is found to have these figures in either investment or turnover, it will be moved up to the next category. For instance, if a micro-enterprise has an investment of more than ₹1 crore but a turnover of ₹4 crore, it will be moved to the small enterprise category.

  • All companies with a Goods and Services Tax Identification Number (GSTIN) listed against the same Permanent Account Number (PAN) will be considered a single enterprise.

Calculation of investment in plant and machinery or equipment in MSME

Here are some things to note in regard to the calculation of investment in plant and machinery or equipment:

  • The investment in plant and machinery or equipment will be calculated as per the income tax returns (ITR) of the previous years.

  • If the enterprise is new and has never filed the ITR before, the investment will be calculated on the self-declaration of the company’s promoter of the company. However, this relaxation will cease to exist after March 31 of the financial year in which the company files its first ITR.

  • ‘Plant and machinery or equipment’ has the same implication and meaning as ‘plant and machinery’ mentioned in the Income Tax Act, 1961. This includes all intangible equipment except for building, land, furniture, and fittings.

  • The Goods and Services Tax (GST) will not be taken into consideration on a self-disclosure basis in the purchase invoice of a plant and machinery and equipment if the company is new and does not have an ITR. This is applicable to new and second-hand purchases.

  • When calculating the investment in plant and machinery, the cost of items mentioned in Explanation I to sub-section (1) of section 7 of the Act will not be included.

Calculation of turnover in MSME

Here are some things to note in regard to the calculation of the turnover of a company:

  • When calculating the turnover, the exports of goods or services or both will be taken into consideration in the case of MSMEs.

  • Any information in regard to the turnover and exports turnover for a company will be linked to the Central Goods and Services Act (CGST Act) or Income Tax Act, 1961, and the GSTIN.

  • Any company without a PAN can calculate the turnover on a self-declaration basis for a period of up to March 31, 2021. Post this, the PAN and GSTIN will be mandatory.

All enterprises that have the Udyam Registration Number can update their information on the Udyam Registration portal. This can include ITR details, GST returns, etc. In case of failure to update the latest information, the enterprise can be suspended. Once the information has been submitted, the company will be classified as micro, small, or medium. Read more on how you can register for an Udyam Registration Certificate here.

You can avail of a Business Loan with HDFC Bank up to ₹75 lakh without any collateral or guarantor. You can also get your existing loan transferred to HDFC Bank at lower EMIs and attractive interest rates.

To learn more about the various products and services at HDFC Bank that can benefit your enterprise, you can check out the MyBusiness page here.

​​​​​​​*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. HDFC Bank recognises the challenges entrepreneurs face while acquiring capital. Thus, HDFC Bank has created MyBusiness, a one-stop solution that gives you easy access to loans, digital solutions and provides you with the essential knowledge you need to run your business. With HDFC Bank MyBusiness, you can scale up, expand your operations, and nurture your business.

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