The Cabinet has approved a change in the basis of classifying Micro, Small and Medium enterprises from ’investment in plant & machinery/equipment’ to ’annual turnover’.

An official statement said, "This will encourage ’ease of doing business’, make the norms of classification growth oriented and align them to the new tax regime revolving around GST (Goods & Services Tax). "

The Section 7 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 will be amended to define units producing goods and rendering services in terms of annual turnover, the statement added.

After the decision, a micro enterprise will be defined as a unit where the annual turnover does not exceed ?5 crore, a small enterprise will be defined as a unit where the annual turnover is more than ?5 crore but does not exceed ?75 crore.

A medium enterprise will now be a unit where the annual turnover is more than ?75 crore but does not exceed ?250 crore.