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:-

Classification Turnover
Micro Enterprise Upto Rs. 5 Crores
Small Enterprise Rs. 5 Crores to Rs. 75 Crores
Medium Enterprise Rs. 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:-

CA Karan Batra, the founder of this website is All India Rank 22 in CA Exams and is regularly featured in both TV and Print media as a leading tax expert. He is the author of 2 books and has vast experience of representing cases before the Tax Dept.