The Micro Small and Medium Enterprise Development Act 2006

Main Features & Implications

The Parliament of India has enacted the Micro, Small and Medium Enterprises Development Act, 2006. The implications of the various provisions of the Act need to be studied in the backdrop of the general scenario of micro, small and medium enterprises in our State.

The Objective of the MSMED Act

To facilitate the promotion and development of and enhancing the competitiveness of micro, small and medium, enterprises and for matters connected therewith or incidental thereto.

Main Features of the MSMED Act

Constitution of a National Board for Micro, Small and Medium Enterprises to:

  • Examine the factors affecting the promotion and development of micro, small and medium enterprises and review the policies and programmes of the Central Government in this direction;
  • Make recommendations for facilitating promotion and development of and enhancing the competitiveness of the micro, small and medium enterprises.
  • Advice the Central Government on use of the Fund or Funds constituted under Section 12 of the Act.

Classification of Enterprises (Principal Trade in First Schedule of IDR Act, 1951)

Nature of Enterprises Manufacturing or production of goods Providing or rendering service
Micro Investment in plant and machinery up to Rs. 25.0 lakhs. Investment in equipment up to Rs. 10.0 lakhs.
Small Investment in plant & machinery above Rs. 25.0 lakhs but not exceeding Rs.5.0 crores. Investment in equipment above Rs. 10.0 lakhs but not exceeding Rs.2.0 crores.
Medium Investment in plant & machinery above Rs. 5.0 crores but not exceeding Rs.10.0 crores. Investment in equipment above Rs. 2.0 crores but not exceeding Rs. 5.0 crores.

Constitution of Advisory Committee at national level to make recommendations:

  • level of employment in a class or classes of enterprises;
  • level of investment in plant and machinery or equipments;
  • Discretionary for a micro or small enterprise and also for a medium enterprises engaged in providing or rendering of services,
  • Obligatory (compulsory) for a medium enterprise engaged in the manufacture or production of goods pertaining to any industry specified in the First Schedule (IDR Act),
  • For medium enterprises, the Central Government shall specify by notification the authority with whom they would file memorandum,
  • In respect of micro & small enterprises the State Govt. shall by notification, specify such Authority.

Measures for promotion, development and enhancement of competitiveness of micro, small and medium enterprises:

  • Extension of credit facility for micro, small and medium enterprises,
  • Preference policies in procurement of goods and services for micro and small enterprises,
  • Provision for Central funds.

Delayed payments to micro and small enterprises:

he Act stipulates that the payments for supplies or services have to be cleared in favour of micro and small enterprises within 45 days of acceptances. The State Government shall, by notification, constitute one or more Micro and Small Enterprises Facilitation Council to monitor the matter of delayed payments

Power to make Rules:

  • The Central Government may, by notification, make rules to carry out the provisions of the Act.
  • The State Government may also, by notification, make rules to carry out the provisions of the Act.