MSME full form: Micro, Small and Medium Enterprises. In India, an MSME is a business classified as micro, small or medium under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), based on its investment in plant and machinery (or equipment) and its annual turnover.
What is an MSME?
An MSME is any manufacturing or service business that falls within the investment and turnover limits below. Proprietorships, partnership firms, LLPs, companies, HUFs and co-operatives can all be MSMEs. Registration on the government’s Udyam portal gives the business an MSME identity, called the Udyam Registration Number.
MSME classification limits (from 1 April 2025)
The limits were raised from 1 April 2025. A business must satisfy both the investment and the turnover test for a category.
| Category | Investment in plant, machinery or equipment | Annual turnover |
|---|---|---|
| Micro | Up to ₹2.5 crore | Up to ₹10 crore |
| Small | Up to ₹25 crore | Up to ₹100 crore |
| Medium | Up to ₹125 crore | Up to ₹500 crore |
Before 1 April 2025 the limits were ₹1 crore / ₹5 crore (micro), ₹10 crore / ₹50 crore (small) and ₹50 crore / ₹250 crore (medium). Turnover from exports is not counted for classification.
What is an MSME certificate?
The MSME certificate is the Udyam Registration Certificate. Registration is free, online and paperless on the official Udyam Registration portal, using the owner’s Aadhaar and the business PAN; investment and turnover are taken from income tax and GST data. There is no renewal. Beware of websites that charge a fee and look like the official portal.
Informal micro businesses without a GSTIN or PAN can register on the Udyam Assist Platform instead. Use our MSME registration checker to see which category you fall in.
Main benefits of MSME registration
- Protection against delayed payments. Buyers must pay a micro or small enterprise within the agreed period, which cannot exceed 45 days (15 days if there is no agreement). Late payment carries compound interest at three times the RBI bank rate (Section 16 of the MSMED Act). Calculate it with our MSME delayed payment calculator.
- Income tax disallowance for buyers. Under Section 43B(h), a buyer can deduct a payment due to a micro or small enterprise only in the year it is actually paid if it is paid late, which pushes buyers to pay on time.
- Easier credit. MSME loans count as priority sector lending, and collateral-free loans are available under the CGTMSE guarantee scheme.
- Government tenders. Many tenders give MSMEs an exemption from earnest money deposits, and central public sector purchases have a set-aside for micro and small enterprises.
- Dispute resolution. Unpaid dues can be referred to the MSME Facilitation Council through the MSME Samadhaan portal.
Points to note
- Traders can register on Udyam, but the delayed-payment protection under Sections 15 to 17 of the MSMED Act applies to manufacturing and service enterprises, not to wholesale and retail traders.
- Medium enterprises are MSMEs, but the 45-day payment rule and Section 43B(h) cover only micro and small enterprises.
- GST registration and MSME registration are separate. Being an MSME does not change your GST rate or GST registration limit; see the GST registration limit checker.