What is MSME classification?
The Micro, Small and Medium Enterprises Development (MSMED) Act classifies businesses into three tiers based on their investment in plant & machinery (or equipment) and annual turnover. Your classification determines what government schemes, bank loans, and procurement preferences you qualify for.
Revised limits effective April 2025
The Union Budget 2025 revised MSME limits significantly — for the first time since 2020. The new thresholds nearly double the previous limits, bringing many more businesses under the MSME umbrella.
| Category | Investment (P&M/Equipment) | Annual Turnover |
|---|---|---|
| Micro | ≤ ₹2.5 crore | ≤ ₹10 crore |
| Small | ≤ ₹25 crore | ≤ ₹100 crore |
| Medium | ≤ ₹125 crore | ≤ ₹500 crore |
Both conditions must be met. If your investment is within the Micro limit but turnover exceeds ₹10Cr, you move to the Small tier (if still within ₹100Cr).
Why MSME classification matters for e-commerce sellers
Most Amazon, Flipkart, and Meesho sellers with annual sales under ₹10 crore qualify as Micro Enterprises — and most don't even know it. Here's why it's worth registering:
- Delayed payment protection — If a buyer or large company owes you money, the MSMED Act mandates payment within 45 days. Violations attract compound interest at 3× the RBI rate.
- Collateral-free loans — CGTMSE scheme guarantees loans up to ₹2 crore without collateral for registered MSMEs.
- Government tenders — 25% of central government procurement is reserved for MSMEs.
- Subsidy on certifications — ISO, Hallmark, GI tag certification costs are partially subsidised.
- Priority sector lending — Banks are mandated to lend to MSMEs as priority sector — faster approval, better rates.
How to register on Udyam
The Udyam Registration portal (udyamregistration.gov.in) is free, fully digital, and Aadhaar-based. You'll need:
- Aadhaar number of the proprietor / director / partner
- PAN of the enterprise
- GSTIN (if registered)
- Bank account details
Registration takes under 15 minutes and gives you a permanent Udyam Registration Number (URN). There is no renewal — it is valid for the lifetime of the enterprise.