The Micro, Small and Medium Enterprises (MSME) sector is a priority sector for the government. Over the years, the government has introduced new schemes, policies, and other initiatives to empower and promote the MSME sector, enabling it to grow and be self-reliant. MSME registration through the Udyam portal is one such initiatives that allows eligible MSMEs to register, download the MSME certificate, and acknowledge their business as a MSME in India. However, not all businesses or types of businesses fulfil the MSME eligibility criteria. Here, we take a look at who is eligible under MSME, who is not eligible for Udyam MSME registration, and other eligibility requirements your business must meet to qualify and register as a MSME on Udyam portal.

Who is eligible under MSME?

Let’s begin with the basics of MSME eligibility – Who is eligible under MSME?

Here, we have to consider two aspects:

• The new MSME classification that categories manufacturing and services businesses as per their annual turnover and investment in plants and machinery/equipment
• The list of businesses under MSMEs, i.e., the type of businesses that can be considered as MSMEs and the type that are not eligible for MSME classification

MSME eligibility in India as per new MSME classification

The concept of MSMEs was first introduced in the MSMED Act 2006.

As per the Act, the MSME eligibility for manufacturing and services sector businesses was outlined primarily based on the investment made in plant and machinery and equipment.

However, with changing times the scope and definition of MSME was expanded and with effect from 1 July 2020, the new classification of MSMEs is based on their annual turnover and investment in plant and machinery/equipment. Moreover, it is a single, composite definition for both services and manufacturing sector businesses to reduce complexities.

It must also be noted that since July 2021, the scope of MSME categorisation has further expanded to include wholesale traders and retailers. This is expected to benefit over 2.5 crores wholesalers and retailers, especially with access to priority sector lending as per RBI guidelines.

Eligibility for MSME as per the type of business

So, who is eligible under MSME?

All entities, including sole proprietorships, partnerships (and LLPs), companies, trusts, self-help groups (SGH), and cooperative societies, meeting the annual turnover and investment criteria are eligible for MSME registration.

An individual, however, cannot register as a MSME. That is, Udyam MSME registration is only for business entities.

What are the criteria of MSME?

The new MSME categorisation is what determines if a company can be regarded as a MSME or not. It is a composite definition, that categories businesses on the basis of their annual turnover and investment in plant and machinery/equipment.

It is also the basis of MSME registration on Udyam.

The table below illustrates the main eligibility criteria for MSME classification for all services and manufacturing sector businesses.

It must be remembered that since 2021, retailers and wholesalers are also eligible for MSME registration. Moreover, e-Commerce businesses can also register as a MSME.

Who is eligible for registration in MSME?

The Udyam portal is the government portal for MSME registration. It’s an online, paperless process, based on self-declaration. You will need your Aadhaar and PAN card only to register your business on Udyam. After successful registration, you can download MSME certificate, which contains your Udyam Registration Number (URN) and a QR code.

For Udyam registration, MSME eligibility in India extends to all businesses that meet the basic requirements as per MSME definition – i.e., MSME limit on turnover and investments, and type of business entities.

All the micro, small, and medium enterprises in the manufacturing and services sector, wholesale and retail, with annual turnover up to ₹250 crores and investment in plant and machinery up to ₹50 crores, are eligible for MSME registration, including e-commerce businesses.

These may include:

• Startups, business owners, and entrepreneurs
• Private and public limited companies
• Sole proprietorship
• Partnership firm
• Limited Liability Partnerships (LLPs)
• Self Help Groups (SHGs)
• Co-operative societies
• Trusts
• e-Commerce business

Here are some key points on eligibility for MSME Udyam registration:

• Open to all new entrepreneurs who have not yet registered their business on Udyam portal as a MSME or those with EM-II
• Open to those with registration as UAM or Udyog Aadhaar can register and migrate (Udyam re-registration)
• Open to e-Commerce businesses (Note: Remember to select business activity as ‘e-Commerce’ during the Udyam registration for e-Commerce process)

For more details on MSME registration eligibility, visit the Udyam portal on: //udyamregistration.gov.in/Government-India/Ministry-MSME-registration.htm

Also read: Is Udyam and MSME registration the same?

Who falls under MSME? List of eligible businesses

As mentioned previously, all manufacturing and services businesses fall under the MSME sector, provided they meet the threshold limits of not exceeding ₹250 crores in annual turnover and ₹50 crores in investment in plant and machinery.

MSME eligibility for service sector

There are no separate MSME eligibility criteria for services and manufacturing sector. It’s a composite definition that extends to all businesses. Some of the services sector businesses eligible for MSME are:

• Placement and management consultancy services
• Legal firms
• Photographic lab
• Laundry and dry cleaning
• Training and educational institute
• Phone booths (STD/ISD booths)
• Call centre
• Security and surveillance services
• IT solutions and services (e.g., application service provider, smart card customisation)

Who is not eligible for Udyam MSME registration?

It must be kept in mind that MSME eligibility in India does not apply to all types of businesses and there are some business entities that are not eligible for MSME status. Check the Udyam portal for MSME registration eligibility. Those who cannot apply for MSME status include:

• An individual, cannot apply for Udyam MSME registration, i.e., MSME eligibility is only for business entities
• Any business with annual turnover of over ₹250 crores is not eligible for MSME registration as it exceeds the MSME turnover limit (i.e., it falls under the category of large businesses)

Apart from the general guidelines on non-eligibility, there are some business types that cannot apply for MSME registration and obtain the Udyam certificate. These include:

• Forestry and logging
• Activities of crop, animal production, hunting, and related activities
• Fishing and aquaculture
• Activities of households as employees for domestic personnel
• Undifferentiated goods and services producing activities of private households for own use
• Activities of extraterritorial organisation and bodies
• Gambling and related activities/ventures

It is therefore, always recommended that you review the list of businesses that fall under MSME category to check whether your business activities are eligible/not-eligible on the portal for Udyam registration.

What documents are required for Udyam registration?

Udyam registration is an online process, based on self-declaration and is entirely paperless. The basic documents for MSME registration that you will only are:

• Aadhaar number
• PAN number
• Active mobile number and email ID

However, during filling in the Udyam registration form you will need to keep your business documents handy to ensure that all the right information is being filled in (e.g., business name, incorporation date, address, bank details, etc.).

Benefits of the Udyam registration

Why is Udyam registration necessary? MSME is a priority sector, and the government is endeavouring to boost the sector to empower it and make it self-reliant. As such, there are several benefits of Udyam MSME registration, namely:

• Avail government subsidy schemes designed for MSMEs
• Obtain finance from banks and NBFCs at better interest rates and concessions
• Avail tax concessions
• Exemption from paying EMD in government e-Tendering (applicable to all micro and small businesses unless otherwise specified)
• Get reimbursement of ISO certification expenses
• Access to markets and exposure to foreign business expo.
• Get capital grant for infrastructure development

If your business is eligible for obtaining a MSME registration certificate, it is best to get it as you can avail multiple benefits from it. Also, process of registration is not lengthy and time consuming.

It is recommended to learn about the online Udyam registration process first to ensure that you can benefit by registering your MSME business.

*For informational purposes only. Please visit the official MSME website and Udyam portal for more details. This article was originally published on 10 March 2023, and has been updated on 30 April 2024 to keep it relevant.

Author: Swati Deshpande

Swati is a passionate content writer with more than 10 years of experience crafting content for the business and manufacturing sectors, and helping MSMEs (Micro, Small and Medium Enterprises) navigate complexities in steel procurement, and business services. Her clear and informative writing empowers MSMEs to make informed decisions and thrive in the competitive landscape.