Every MSME protection in this compilation depends on whether the supplier is a micro or small enterprise. Since 1 April 2025 the ceilings are 2.5 times higher on investment and twice as high on turnover. Classification uses both tests together, so using the old thresholds, or only the more favourable test, produces wrong answers in tax, reporting and disputes.

1. The thresholds in force

The Ministry of MSME issued Notification S.O. 1364(E) on 21 March 2025, effective 1 April 2025, superseding the thresholds notified by S.O. 2119(E) of 26 June 2020. Classification continues to use investment in plant and machinery or equipment together with annual turnover.

2. How the two tests combine

An enterprise belongs to a category only if it meets both limits. If it exceeds either limit for its current category, it moves to the next higher one, and it moves back down only when it is under the limits in both. Exports of goods or services are excluded when computing turnover for classification, and the turnover and investment information is linked to the Income-tax and GST data. Some online summaries describe the test as “either/or”. That is wrong for classification and could lead a buyer to treat a supplier as small when it is in fact medium.

3. Registration, updating and status changes

Udyam registration is online, free and Aadhaar-based, and an enterprise gets a permanent Udyam Registration Number. Information has to be updated annually with the previous year’s ITR and GST return details, and failure to update can lead to suspension of status. Under the 2020 notification an upward change in classification was given a transition period of one year from the close of the year of registration, while a downward change took effect from 1 April of the following financial year. Check whether the 2025 notification carries those transition rules in the same form.

4. Three ways classification goes wrong

•      Old thresholds. A buyer working from a vendor master built before April 2025 may treat a supplier with ₹60 crore turnover and ₹15 crore investment as medium, when under the current ceilings it is small and inside the regime.

•      One test only. Looking only at turnover, or only at investment, ignores the rule that crossing either limit changes the category.

•      Status at the wrong date. What matters for a given supply is the supplier’s status when the supply was made and when the contract was entered into. Keep the certificate and its date with the invoice.

5. Registration timing and the Supreme Court

Section 2(n) defines a “supplier” as a micro or small enterprise that has filed a memorandum under section 8, with some extended categories. In Silpi Industries (2021) and Mahakali Foods (2023) the Court said that registration obtained after a contract takes effect only prospectively. In NBCC (India) Ltd. v. State of West Bengal (10 January 2025) a two-judge bench held that a reference to the Facilitation Council cannot be rejected solely because the enterprise had not filed a memorandum before the contract. It treated the earlier remarks as not deciding that issue, and referred the matter to a three-judge bench for an authoritative decision. The outcome of that reference should be checked before advising on supplies made before registration.

6. What the 2026 Amendment Act changes

The MSMED (Amendment) Act, 2026 received assent on 13 August 2026. It substitutes section 7 so that the Central Government classifies enterprises by notification on the basis of investment and turnover applied together, and substitutes section 8 with a free, voluntary digital registration platform. Its provisions take effect on dates the Central Government notifies. As far as could be verified, no commencement notification had been located at the time of writing, so the 2025 thresholds and the existing section 8 continue to apply until one is issued.