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A buyer does not know whether a supplier is micro, small or medium, so cannot tell which payment rule applies.
Classify on investment and turnover together using the limits revised from 1 April 2025; crossing either moves the tier up.
Vendor master fields for Udyam number, tier, principal activity and date last checked.
Each supplier tagged with its current tier and whether the 15 or 45-day rule applies.
An enterprise is classed as micro, small or medium on two tests read together: its investment in plant and machinery or equipment, and its turnover. If it crosses either limit, it moves up a tier. For a buyer this matters because only micro and small suppliers bring the 15 and 45-day payment rule and the income tax add-back that goes with it.
What are the limits for each tier?
The limits below were revised with effect from 1 April 2025, following Union Budget 2025.
| Tier | Investment limit | Turnover limit |
|---|---|---|
| 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 |
The earlier limits, used from 2020, were lower (micro was ₹1 crore investment and ₹5 crore turnover). Some older articles and certificates still show those, so check which set a source uses.
Turnover for this purpose excludes exports, and both figures are drawn from the enterprise’s income tax and GST records rather than from what it types into a form.
Why does my supplier’s tier matter to me as a buyer?
Two rules hang on it:
- The MSMED Act 2006 requires buyers to pay micro and small suppliers within 15 days of acceptance, or within the agreed period if there is a written agreement, capped at 45 days. Late payment carries compound interest at three times the bank rate notified by RBI.
- Section 43B(h) of the Income-tax Act 1961, from AY 2024-25, lets a buyer deduct a payable to a micro or small supplier only in the year it is actually paid, if it is paid late.
Medium suppliers fall outside both. So do traders in most readings. If you tag a medium supplier as small, you may over-provide for the add-back; if you tag a small supplier as medium, you may miss it.
Who decides the tier, and can it change?
The enterprise registers on the Udyam portal and receives a Udyam registration number. The tier on the Udyam record is what counts, and it is updated as the enterprise’s investment and turnover data change. A supplier that grows past ₹100 crore turnover will move from small to medium. That is why the tier should be rechecked at least once a year, ideally before 31 March.
Worked example: one supplier, two years
A components supplier has ₹3 crore of investment in plant and machinery.
- Year 1: turnover ₹40 crore. Investment ₹3 crore is above the micro limit of ₹2.5 crore, so it is not micro. Both figures are within ₹25 crore and ₹100 crore, so it is small. Your dues to it fall under the 45-day rule.
- Year 2: turnover rises to ₹110 crore. That crosses the ₹100 crore small limit, so it becomes medium, even though investment is unchanged. Your dues to it now fall outside the rule.
If your payables to this supplier are ₹18,00,000 at year-end and 60 days old, in Year 1 that amount could be added back to your taxable income; in Year 2 it would not.
What to read next
- Next step: Udyam registration, Udyog Aadhaar or MSME certificate: which is valid today.
- How do I know if my vendor is MSME registered.
- What is the Section 43B(h) MSME 45-day rule. Note that article still lists the older 2020 limits; use the table above for current figures.
- Related: MSME payment tracker.