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January 2023

MSME Act, 2006 – 12 Compliance Action Points for Entities Dealing with MSMEs

By Sunil Gabhawalla, Chartered Accountant
Reading Time 20 mins
BACKGROUND OF THE MSME ACT, 2006
The Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act) provides for the registration of micro, small and medium enterprises (MSME) based on the specified criteria. It thereafter provides for a host of measures for the promotion, development and enhancement of the competitiveness of micro, small and medium enterprises. It also casts various obligations on entities dealing with such MSME enterprises. This article explains the extent of obligations cast on entities dealing with such MSME enterprises and the consequences of non-compliance with such obligations. MEANING OF ENTERPRISE AND APPLICABILITY OF MSME ACT
Section 7 of the MSME Act provides the criteria based on which an enterprise is classified as either a micro-enterprise, small enterprise, or medium enterprise. However, before venturing into the specific criteria for classifying an enterprise into micro, small or medium, it may be important to look at the definition of ‘enterprise’ as provided u/s 2(e) of the Act. The said definition is significant and reproduced below for ready reference: “enterprise” means an industrial undertaking or a business concern or any other establishment, by whatever name call
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