Section 7 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The Advisory Committee is the expert body behind the classification of micro, small and medium enterprises. Sub-sections (2) to (8) of section 7 say who is on it, who can ask for its advice, and which factors it must weigh. The Central Government cannot classify enterprises under section 7(1) without first obtaining its recommendations.
The Central Government constitutes the Advisory Committee by notification. Its Chairperson is the Secretary in the MSME Ministry, and the Board's Member-Secretary is also its Member-Secretary. Before classifying any class of enterprises, the Government must obtain the Committee's recommendations. The Committee also advises the Board, the Central Government on sections 9, 10, 11, 12 and 14, and a State Government on matters in State rules, after weighing employment, investment, technological upgradation and entrepreneurship.
Sub-sections (2) and (3): constitution and membership
Sub-section (2) requires the Central Government to constitute the Committee "by notification". Its members are:
| Clause | Member |
|---|---|
| (a) | The Secretary to the Government of India in the Ministry or Department having administrative control of small and medium enterprises, as Chairperson, ex officio |
| (b) | Not more than five Central Government officers with the necessary expertise in MSME matters, ex officio |
| (c) | Not more than three representatives of State Governments, ex officio; and one representative each of the associations of micro, small and medium enterprises, ex officio |
Sub-section (3) makes the Member-Secretary of the Board the ex officio Member-Secretary of the Committee. The Board itself is covered in our article on section 3.
Two things to note. All members are ex officio, so seats follow offices and not individuals. The text of clause (c) puts State representatives and association representatives in one clause; it speaks of "one representative each of the associations of micro, small and medium enterprises", which we read as one representative for each of the three kinds of association.
Sub-section (4): recommendations before classification
Sub-section (4) is the provision with practical consequence. It says the Central Government "shall, prior to classifying any class or classes of enterprises under sub-section (1), obtain the recommendations of the Advisory Committee". This is a mandatory step. Both Udyam notifications recite it. S.O. 2119(E) says it is made "after obtaining the recommendations of the Advisory Committee in this behalf", and S.O. 1364(E) says the same for the 2025 revision. Section 8(2) adds the same step for the form and procedure of the memorandum, which the Central Government notifies "after obtaining the recommendations of the Advisory Committee". That is how the Udyam framework is tied back to this body. See also section 7(1).
Sub-section (5): matters referred by the Board
The Committee examines matters "referred to it by the Board in connection with any subject referred to in section 5" and furnishes its recommendations to the Board. Section 5 covers the Board's functions: examining factors affecting promotion and development, recommending, and advising on the Fund or Funds under section 12. So the Board can send a policy question to the Committee for expert input.
Sub-sections (6) and (7): who else may seek advice
- Central Government (sub-section 6): may seek the Committee's advice on matters in sections 9, 10, 11, 12 or 14 of Chapter IV. Those cover promotion and development measures, credit facilities, procurement preference policies, the Fund or Funds, and the administration and utilisation of the Fund.
- State Government (sub-section 7): may seek the Committee's advice on matters specified in the rules made under section 30. Section 30 is the State rule-making power, which includes the composition of the Facilitation Council under section 21.
Sub-section (8): what the Committee must consider
Before communicating its recommendations or advice to the Central Government, the State Government or the Board, the Committee must consider:
| Clause | Matter |
|---|---|
| (a) | The level of employment in a class or classes of enterprises |
| (b) | The level of investments in plant and machinery or equipment in a class or classes of enterprises |
| (c) | The need of higher investment in plant and machinery or equipment for technological upgradation, employment generation and enhanced competitiveness of the class or classes |
| (d) | The possibility of promoting and diffusing entrepreneurship in micro, small or medium enterprises; the international standards for classification of small and medium enterprises |
The last clause reads as two items joined by a semicolon. As printed in our source, it covers entrepreneurship and international standards for classification of small and medium enterprises.
How this links to the Udyam notifications
The notifications revised the criteria using section 7(1) read with section 7(9). The Committee's role is the procedural step before that. The Act does not set a timetable for the Committee and does not make its recommendations binding; it says the Government must "obtain" them before classifying. Whether the Government must follow them is not stated in the text.
If your registration or funding plans depend on how the classification may change, a legal consultation can help you keep your filings aligned with the current notified criteria. For a general explanation of the classification itself, see our guide on MSME classification criteria.
Practical examples
Example 1: a revision of limits. The Central Government wants to raise the investment and turnover limits. Under sub-section (4) it must first obtain the Committee's recommendations. The Committee considers employment levels, investment levels, the need for technological upgradation and international classification standards under sub-section (8).
Example 2: a State query. A State Government wants advice on a matter specified in its rules under section 30. Sub-section (7) allows it to consult the Committee.
Common mistakes
- Treating the Advisory Committee as the same body as the Board. They are separate, sharing only the Member-Secretary.
- Assuming the Committee classifies enterprises. It recommends; the Central Government classifies under section 7(1).
- Forgetting that section 8(2) also requires the Committee's recommendations for the memorandum form and procedure.
Need help with MSME classification or registration?
If you want to be sure that your registration rests on the current notified criteria, we can check your details against them. Our MSME Udyam registration service covers filing and review, and you can also start with a legal consultation.
Key takeaways
- The Central Government constitutes the Advisory Committee by notification; the MSME Ministry Secretary chairs it.
- The Board's Member-Secretary is also the Committee's Member-Secretary.
- Section 7(4) requires the Government to obtain the Committee's recommendations before classifying enterprises.
- The Committee advises the Board (section 5 matters), the Central Government (sections 9, 10, 11, 12, 14) and State Governments (matters in State rules).
- It must weigh employment, investment, technological upgradation and entrepreneurship, and international standards for classification.
Read next
- Section 7 of the MSMED Act, 2006: Classification of enterprises
- Section 7 of the MSMED Act, 2006: Power to vary classification criteria
- Section 3 of the MSMED Act, 2006: The National Board for Micro, Small and Medium Enterprises
- MSME Classification Under S.O. 1364(E) and Udyam Registration
Disclaimer: Based on the Micro, Small and Medium Enterprises Development Act, 2006 (official text, not amended by the Jan Vishwas Acts of 2023 or 2026) and the Udyam notifications S.O. 2119(E) of 26 June 2020 and S.O. 1364(E) of 21 March 2025, read with later developments noted in the article, as on 30 September 2026. Notifications, rules and the Udyam portal change; verify the current position before acting.