The new classification of MSME on the basis of Turnover


The classification of MSME for both goods and services organisation is done on the basis of the turnover and is as follows:-

Micro EnterpriseUpto Rs. 5 Crores
Small EnterpriseRs. 5 Crores to Rs. 75 Crores
Medium EnterpriseRs. 75 Crores to Rs. 250 Crores

Until recently, the classification of MSMEs was done on the basis of the investment put in the business. It was calculated as a sum total of the money invested in the plant, machinery and equipments.

For a company manufacturing goods-

  • Micro Enterprise- Upto Rs. 25 lakhs
  • Small Enterprise- Rs. 25 lakhs – 5 crores
  • Medium Enterprise- Rs. 5 crores – 10 crores

For a service organisation-

  • Micro Enterprise- Upto Rs. 10 lakhs
  • Small Enterprise- Upto Rs. 10 lakhs – 2 crores
  • Medium Enterprise- Rs. 2 crores – 5 crores

Due to this classification, the government had to incur expenses to physically verify the actual assets and chart up the actual investments made.

Now, the government has passed a new bill, which classifies the MSMEs based on its annual turnover instead of investment.

The revised basis for classification of MSMEs based on turnover has made it easier for both the government and the industries to recognize a business as an MSME.

The Government can look up in the GST database to match the actual turnover cited by an organisation and accordingly classify it into the MSME category.

Unlike the previous classification basis where the criteria was different for goods and service sector, in the revised parameters there is just one basis of classification for goods and service sector.

Here’s a glance at the end for quick reference:-

Karan is CA by Qualification with the rare distinction of being awarded All India Rank 22. He is also the founder of this website and is an expert in helping people save Taxes legally. He can be reached by booking an appointment for Tax Advisory Service.