Micro, Small, and Medium Enterprises (MSMEs) play a crucial role in India’s economy by generating employment, increasing industrial output, and contributing to exports. More than 25 crore people are employed by the 5.93 crore registered MSMEs in India.MSME classification is the process of categorising these businesses by size and financials in order to better record their growth and participation within the economy. The Government of India classifies businesses into different MSME categories to ensure they receive appropriate financial and policy support, based on their scale and potential. Understanding this classification is essential for businesses that want to take advantage of various government incentives and schemes.
Let’s explore the classification of MSMEs and what the Indian government’s latest classification of MSMEs means for each of the sub-categories.
What is MSME Classification?
MSME classification is based on the investment made in plant and machinery or equipment and the annual turnover of the business. The primary objective of this classification of MSMEs is to provide structured financial support and policy benefits to smaller enterprises, allowing them to compete in the market with greater ease. By falling under the MSME category, businesses gain access to credit at lower interest rates, enjoy priority sector lending, and can benefit from various government subsidies and tax exemptions. MSMEs also receive protection under delayed payment relief provisions, ensuring they maintain a steady cash flow. The classification of micro small and medium enterprises is applicable to a diverse range of businesses, covering manufacturing, trading, and service-based enterprises, thereby fostering inclusive economic growth across multiple sectors.
Revised MSME Classification and Turnover Limits Since 2025
With the Union budget 2025-26, the Government of India revised the MSME categorization criteria. The revised MSME classification considers both investment and turnover, and it no longer differentiates between manufacturing and service enterprises.
| Enterprise | Investment | Turnover | ||
| Current (Crore) | Revised (Crore) | Current (Crore) | Revised (Crore) | |
| Micro Enterprise | 1 | 2.5 | 5 | 10 |
| Small Enterprise | 10 | 25 | 50 | 100 |
| Medium Enterprise | 50 | 125 | 250 | 500 |
- A Micro Enterprise is defined as a business with an investment of up to INR 2.5 crore and an annual turnover of up to INR 10 crores.
- A Small Enterprise is one where the investment does not exceed INR 25 crores, and the annual turnover is up to INR 100 crores.
- A Medium Enterprise is classified as a business with an investment of up to INR 125 crores and an annual turnover of up to INR 500 crores.
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List of Businesses That Come Under MSME
A wide range of businesses fall under the MSME category. Below is a breakdown of businesses classified under MSMEs.
Businesses Under Micro Enterprises
Micro enterprises typically operate with minimal investment and lower revenue generation. Examples include handicrafts and artisan businesses, small-scale food processing units, tailoring and embroidery services, local retail shops, home-based businesses such as handmade jewelry and candle-making, and repair and maintenance services.
Businesses Under Small Enterprises
Small enterprises operate at a slightly larger scale and employ more workers. Common examples of small enterprises include small-scale manufacturing units involved in textiles, paper, and chemicals, printing and publishing businesses, restaurants and small food processing industries, healthcare clinics and diagnostic centers, travel agencies and tourism-related businesses, small IT firms and software development companies, automobile repair workshops, and packaged food production businesses.
Businesses Under Medium Enterprises
Medium enterprises operate on a much larger scale and often have a significant market presence. Examples include medium-scale manufacturing units such as those producing electronics, furniture, and steel, export-oriented businesses, large textile mills, plastic product manufacturing companies, pharmaceutical and medical equipment manufacturers, construction and real estate firms, logistics and warehousing companies, and renewable energy businesses, such as solar panel manufacturing and wind energy solutions.
Conclusion
Understanding MSME classification is crucial for businesses looking to benefit from government schemes and financial incentives, as well as accessing formal financial services like MSME loans, supporting their growth. The revised classification system ensures that businesses across MSME sectors can access these forms of support, in accordance with their scale and requirements. By identifying their appropriate category, businesses can leverage opportunities for growth, avail of tax benefits, and obtain easier access to formal credit.
FAQs
1. What are the latest criteria for MSME classification in India?
As per the 2025 revision issued by the government, MSME classification is based on investment in plant and machinery or equipment and annual turnover. Micro enterprises have an investment limit of up to INR 2.5 crore and a turnover of up to INR 10 crores. Small enterprises can have an investment of up to INR 25 crores and a turnover of up to INR 100 crores. Medium enterprises can have an investment of up to INR 125 crores and a turnover of up to INR 500 crores.
2. Can a service-based business qualify as an MSME?
Yes, the 2020 revision removed the distinction between manufacturing and service enterprises. Any business, including service providers, can register as an MSME if they meet the investment and turnover criteria.
3. What documents are required for MSME registration?
To register as an MSME, businesses typically need to provide an Aadhaar card of the business owner, PAN card, business address proof, bank account details, and GST registration if applicable.
4. Are MSMEs eligible for government subsidies?
Yes, MSMEs are eligible for various government subsidies, including credit-linked capital subsidies for technology upgradation, interest subvention on loans, export promotion incentives, and power tariff concessions.
5. How does MSME classification impact taxation benefits?
MSMEs receive several tax benefits, such as lower interest rates on business loans, exemption from certain direct taxes, delayed payment relief under the MSME Act, and access to GST composition schemes for small businesses.
