99% businesses in India now in MSME category

NEW DELHI: A change in definition of micro, small and medium enterprises (MSME) has turned India into a country of small businesses as nearly 99% of the entities now fall under the category based on the twin parameters of investment and turnover.

An entity can be classified as a micro enterprise if investment is up to Rs 1 crore and turnover does not exceed Rs 5 crore. The corresponding figures are Rs 10 crore and Rs 50 crore for small and Rs 50 crore and Rs 250 crore for medium enterprises .

Govt to use I-T, GST data to plug gaps
Investment in plant and machinery has been the traditional parameter on which MSMEs have been classified, enabling them access to various sops such as concessional finance, though the main benefit of excise duty relief has been lost ever since the GST regime was implemented.


Government sources told that numbers with the GST authorities show that 99% of the entities have a turnover that fits into the MSME definition. More than half the businesses registered with GST Network have less than Rs 20 lakh turnover, the earlier registration threshold.

As an added relief, export turnover has been excluded to enable more units to get the benefit. Similarly, income tax department's analysis showed that when it comes to investment, the written down value of assets, that is after depreciation, there are a few thousand entities in India that have investments in plant and machinery or equipment that exceed Rs 50 crore, the ceiling for medium enterprises.

The numbers have come as a surprise to policymakers as the definition was finalized before looking at them in detail.

It is only now that the MSME ministry has sought to plug the gaps as it detected that by using one Aadhaar number, five Udyog Aadhaar Numbers could be generated, encouraging businesses to split their units into five separate entities and claim all the benefits. It has now decided to tap the income tax and GST database to get a better picture of enterprises claiming benefits.