MSME Classification Criteria Revised: New Investment and Turnover Thresholds Announced

The Ministry of Micro, Small and Medium Enterprises vide notification S.O. 1364(E), dated March 21^st, 2025 (the “Recent Notification”), has amended the classification criteria for micro, small and medium enterprises (“MSMEs”) under the Micro, Small and Medium Enterprises Development Act, 2006 (the “MSME Development Act”). These amendments modify the classification framework established through notification S.O. 2119(E), dated June 26, 2020, issued by the Ministry of Micro, Small and Medium Enterprises (the “Principal Notification”).  

The Principal Notification establishes composite classification criteria for MSMEs, specifying threshold limits for investment in plant and machinery or equipment, as well as turnover. If an enterprise exceeds the prescribed limit for its current category in either investment or turnover, it will be reclassified into the next higher category. However, an enterprise will not be downgraded to a lower category unless it falls below the specified limits for both investment and turnover. The said ceiling limits for investment and turnover have been amended by way of the Recent Notification.

As per the Principal Notification, the MSMEs are classified into micro, small, and medium enterprises based on the following criteria:

• Micro Enterprises: Investment in plant and machinery or equipment does not exceed  INR 1 crore (Indian Rupees One Crore), and turnover does not exceed INR 5 crore (Indian Rupees Five Crores).
• Small Enterprises: Investment in plant and machinery or equipment does not exceed INR 10 crore (Indian Rupees Ten Crores), and turnover does not exceed INR 50 crore (Indian Rupees Fifty Crores).
• Medium Enterprises: Investment in plant and machinery or equipment does not exceed INR 50 crore (Indian Rupees Fifty Crores), and turnover does not exceed INR 250 crore (Indian Rupees Two Hundred and Fifty Crores).

Modified Classification Criteria

Following is the revised classification criteria for MSMEs introduced through the Recent Notification:

The new classification ceiling limit shall become effective from April 1^st, 2025.

A&A Comment

The Recent Notification marks a significant revision in the classification criteria for MSMEs by increasing the investment and turnover thresholds across all categories. This amendment is expected to benefit enterprises by enabling them to grow without the risk of losing MSME status prematurely, thereby continuing to avail regulatory benefits and incentives. The revised limits provide greater flexibility for scaling operations while maintaining access to priority sector lending and other government support schemes. Businesses should assess their classification under the new criteria to ensure continued compliance and optimize their benefits under the MSME Development Act.