New MSME Definition Effective from April 1, 2025: Key Changes and Implications

StartBizz India: New MSME Definition from April 1, 2025—Is Your Business Still Eligible? Contact Us to Find Out!

StartBizz India: New MSME Definition from April 1, 2025—Is Your Business Still Eligible? Contact Us to Find Out!

The Ministry of Micro, Small, and Medium Enterprises (MSME) has issued a new notification revising the definition and classification of MSMEs, which will come into effect from April 1, 2025. This move aims to provide broader financial and operational support to enterprises by increasing the investment and turnover limits for classification.

Here’s an overview of the changes and what they mean for businesses across India:

Revised Classification of MSMEs

The revised classification is based on investment in plant and machinery or equipment and annual turnover. The new limits are as follows:

1. Micro Enterprises

• Investment: Up to ₹2.5 crore (increased from ₹1 crore)

• Turnover: Up to ₹10 crore (increased from ₹5 crore)

2. Small Enterprises

• Investment: Up to ₹25 crore (increased from ₹10 crore)

• Turnover: Up to ₹100 crore (increased from ₹50 crore)

3. Medium Enterprises

• Investment: Up to ₹125 crore (increased from ₹50 crore)

• Turnover: Up to ₹500 crore (increased from ₹250 crore)

These enhanced limits provide greater flexibility for businesses to expand operations without losing MSME benefits.

Registration Process for MSMEs

The Udyam Registration Portal remains the primary platform for MSME registration. The process is designed to be simple, transparent, and paperless, with registration based on self-declaration. Key points include:

• No Document Upload: Enterprises only need to submit basic information without the need for additional paperwork.

• Udyam Registration Number (URN): On successful registration, a permanent identification number will be assigned.

• E-Certificate: An e-certificate will be issued, confirming the MSME status.

Who Can Register?

• Proprietorships

• Partnerships

• Hindu Undivided Families (HUFs)

• Companies

• LLPs

• Societies and Trusts

A single Udyam registration is permitted per enterprise, regardless of its various activities.

Composite Criteria for Classification

The revised classification uses a composite criteria system, considering both investment and turnover.

• If an enterprise exceeds the specified limit in either investment or turnover, it will move to the next higher category.

• An enterprise can only move to a lower category if it falls below the limit in both investment and turnover for a sustained period.

Additionally, enterprises with multiple Goods and Services Tax Identification Numbers (GSTIN) under the same Permanent Account Number (PAN) will be collectively treated as one entity.

Calculation Methods for Investment and Turnover

1. Investment in Plant and Machinery or Equipment

• Linked to the Income Tax Return (ITR) of previous years.

• For new enterprises, the investment will be based on self-declaration until the first ITR is filed.

• GST will be excluded from the valuation.

2. Turnover Calculation

• Export turnover will be excluded to promote export-oriented enterprises.

• Figures will be verified using the Income Tax Act and GSTIN records.

Impact on Existing MSMEs

• Re-registration: MSMEs registered under earlier classifications will need to re-register on the Udyam portal from July 1, 2020, to be eligible for the revised benefits.

• Validity: Existing registrations will remain valid only until March 31, 2021.

• Enterprises registered with other agencies under the Ministry of MSME will also need to shift to the Udyam portal.

Facilitation and Grievance Redressal

To ensure a smooth transition, the Champions Control Rooms and District Industries Centres (DICs) will act as single-window facilitation systems. Entrepreneurs facing registration issues can seek assistance from these centers.

• Individuals without an Aadhaar number can use alternative identification documents for initial registration.

• Complaints and discrepancies will be handled through an organized grievance redressal system at the district and state levels.

Penalties for Misrepresentation

Any enterprise providing false information during registration or misrepresenting data will face strict penalties as per Section 27 of the MSMED Act, 2006.

Conclusion

The revised MSME definition from April 1, 2025, marks a significant shift in empowering small and medium businesses. The increased investment and turnover limits are expected to:

• Promote business growth

• Encourage formalization of enterprises

• Support job creation

• Boost exports and overall economic development

Entrepreneurs are encouraged to stay informed, register on the Udyam Portal, and make the most of the enhanced support provided under the MSME scheme.

For further information, visit the official MSME website or contact your local District Industries Centre.

Here’s the Suggested Q&A:

What is the new MSME definition effective from April 1, 2025?

The new MSME definition effective from April 1, 2025, revises the classification of MSMEs based on investment in plant and machinery or equipment and annual turnover. The new limits are:

Micro Enterprises: Investment up to ₹2.5 crore and turnover up to ₹10 crore.

Small Enterprises: Investment up to ₹25 crore and turnover up to ₹100 crore.

Medium Enterprises: Investment up to ₹125 crore and turnover up to ₹500 crore.

What is the Udyam Registration Portal?

The Udyam Registration Portal is the primary platform for MSME registration. The process is simple, transparent, and paperless, based on self-declaration. Key points include no document upload, issuance of a Udyam Registration Number (URN), and an e-certificate confirming MSME status.

Who can register as an MSME?

The following entities can register as MSMEs:

Proprietorships

Partnerships

Hindu Undivided Families (HUFs)

Companies

LLPs

Societies and Trusts

A single Udyam registration is permitted per enterprise, regardless of its various activities.

What is the composite criteria for MSME classification?

The revised classification uses a composite criteria system, considering both investment and turnover. If an enterprise exceeds the specified limit in either investment or turnover, it will move to the next higher category. An enterprise can only move to a lower category if it falls below the limit in both investment and turnover for a sustained period.

How is investment in plant and machinery or equipment calculated?

Investment in plant and machinery or equipment is linked to the Income Tax Return (ITR) of previous years. For new enterprises, the investment will be based on self-declaration until the first ITR is filed. GST will be excluded from the valuation.

What is the impact on existing MSMEs?

Existing MSMEs registered under earlier classifications will need to re-register on the Udyam portal from July 1, 2020, to be eligible for the revised benefits. Existing registrations will remain valid only until March 31, 2021. Enterprises registered with other agencies under the Ministry of MSME will also need to shift to the Udyam portal.

What are the penalties for misrepresentation during MSME registration?

Any enterprise providing false information during registration or misrepresenting data will face strict penalties as per Section 27 of the MSMED Act, 2006.