MSME: definition, thresholds and what registration opens

The definition

India classifies an enterprise as micro, small or medium under the Micro, Small and Medium Enterprises Development Act, 2006, using two figures together: investment in plant and machinery or equipment, and annual turnover. An enterprise has to sit within both limits of a class to be in it; crossing either limit moves it up.

The limits were raised in the Union Budget of February 2025 and took effect on 1 April 2025:

Exports are excluded from the turnover figure, so an exporter is not pushed out of a class by what it sells abroad.

Why the class matters

The class decides which schemes a firm can use: priority-sector lending and the credit guarantee cover, the public-procurement preference for micro and small firms, delayed-payment protection under the Act, and the state industrial policies that pay capital or interest subsidies by class. It also decides who may apply for the PLI scheme tiers that have MSME windows.

The class can also decide when a compliance obligation starts to bind. Several Quality Control Orders set a later commencement date for micro and small enterprises than for other firms, as the aluminium QCO’s tiered dates do, which makes the registered class worth settling before a deadline rather than after one.

How to be counted

The classification is claimed, not awarded: a firm registers on the Udyam portal and is classified from the investment and turnover figures the portal pulls from its income-tax and GST records. The process is described under Udyam registration. Most of the exhibitors at an industrial show, and most of the readers of this site, are micro or small by these definitions; the dates and venues of the next ones are on this site’s industrial exhibition calendar.

Changes to the thresholds, and to the schemes that turn on them, are reported as they are notified on this site’s MSME scheme news from India beat.