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.
Section 7(9) is the provision that lets the classification of enterprises move with time. It allows the Central Government to vary the investment criterion, to bring in turnover or employment, and to treat tiny and village enterprises as part of small enterprises. Both Udyam notifications of 2020 and 2025 cite it as a source of power.
While classifying under section 7(1), the Central Government may, "from time to time", vary the criterion of investment and also consider criteria or standards in respect of employment or turnover. It may also include micro or tiny enterprises or village enterprises as part of small enterprises. The power applies despite section 11B of the Industries (Development and Regulation) Act, 1951 and clause (h) of section 2 of the Khadi and Village Industries Commission Act, 1956.
The text in plain terms
Sub-section (9) opens with a non-obstante clause. It operates "notwithstanding anything contained in section 11B of the Industries (Development and Regulation) Act, 1951 and clause (h) of section 2 of the Khadi and Village Industries Commission Act, 1956". The Central Government may, "while classifying any class or classes of enterprises under sub-section (1)":
- vary, from time to time, the criterion of investment;
- also consider criteria or standards in respect of employment or turnover; and
- include in such classification the micro or tiny enterprises or the village enterprises, as part of small enterprises.
| Power | What it allows |
|---|---|
| Vary investment | Raise or change the investment limits fixed in section 7(1) |
| Employment or turnover | Add criteria beyond investment |
| Tiny and village enterprises | Place them within the "small" category |
The phrase "from time to time" means the power is not used up by a single notification. It can be exercised again whenever the Government decides to revise the limits, which is what happened in 2020 and 2025.
The link to section 7(1)
Section 7(1) sets the original investment limits for manufacturing and services. Sub-section (9) is how those limits were superseded. Our article on section 7(1) shows the original table. The Act's own text was not re-written; the changes came through notifications.
Sub-section (9) works only "while classifying ... under sub-section (1)", so any use of it must also meet the conditions in sub-section (4), which requires the Central Government to obtain the recommendations of the Advisory Committee before classifying. See our article on the Advisory Committee.
How the 2020 and 2025 notifications used it
The preamble to S.O. 2119(E) of 26 June 2020 says it is issued "in exercise of the powers conferred by sub-section (1) read with sub-section (9) of section 7 and sub-section (2) read with sub-section (3) of section 8". S.O. 1364(E) of 21 March 2025 recites the same provisions.
| Notification | Use of section 7(9) |
|---|---|
| S.O. 2119(E), 26.06.2020, effective 01.07.2020 | Introduced the composite criterion of investment in plant and machinery or equipment and turnover (paragraph 3(1)), replacing the earlier investment-only tests. |
| S.O. 1364(E), 21.03.2025, effective 01.04.2025 | Raised the investment and turnover limits in paragraph 1. |
The current limits, as substituted by S.O. 1364(E), are:
| Category | Investment does not exceed | Turnover does not exceed |
|---|---|---|
| Micro | Rs 2.5 crore | Rs 10 crore |
| Small | Rs 25 crore | Rs 100 crore |
| Medium | Rs 125 crore | Rs 500 crore |
Our articles on composite criteria and on the 2025 revision walk through the application.
Employment
Sub-section (9) also mentions "employment". Neither the 2020 nor the 2025 classification paragraph uses employment as a test. The Udyam registration form does ask for the number of persons employed (item 19), but as information; the classification itself turns on investment and turnover. The power to use employment remains in the Act if the Government chooses to use it.
Turnover and exports
Turnover is computed under paragraph 5 of S.O. 2119(E), which excludes exports of goods or services from the turnover figure used for classification. That is a notification rule, not a term of section 7(9). See our article on calculating turnover.
Parliamentary oversight: what the text says
Section 29(3) requires "every notification issued under section 9 and every rule made by the Central Government under this section" to be laid before Parliament. A notification under section 7 is not mentioned there. The text of section 29(3) speaks only of section 9 notifications and rules, so do not assume that section 7 notifications carry the same laying requirement without checking.
Why business owners should care
Because limits can change, a business should test its classification against the current notified limits at least when it registers, updates its Udyam details or plans a large investment. A rise in turnover or investment can move an enterprise up a category, and paragraph 8 of S.O. 2119(E) sets transition rules, covered in our articles on updation and graduation. If you need help placing your enterprise or updating its registration, our MSME Udyam registration service can help.
Practical examples
Example 1: a turnover-heavy trader. Under the 2006 text a business with modest equipment investment would have been micro or small on investment alone. Under the composite test introduced under section 7(9), the same business may move up because its turnover crosses the ceiling for its category.
Example 2: a limit revision. When the Government raised the limits from 1 April 2025, an enterprise that had crossed the old ceiling on turnover could fall back within a higher ceiling of its category. The effect on its recorded category follows the transition rules in the Udyam notification, not section 7(9) itself.
Common mistakes
- Reading section 7(9) as a fixed set of limits. It is a power, not a table.
- Assuming employment is used today. The classification paragraph relies on investment and turnover.
- Ignoring the Advisory Committee step that sub-section (4) requires before classification.
- Treating the section 29(3) laying requirement as automatically applying to section 7 notifications.
Need help placing your enterprise in the right category?
Classification affects your Udyam certificate and the benefits linked to it. Our MSME Udyam registration team can check your investment and turnover against the current notified limits and help you file or update your details.
Key takeaways
- Section 7(9) lets the Central Government vary the investment criterion from time to time.
- It also allows criteria or standards on employment or turnover, and inclusion of tiny and village enterprises within small enterprises.
- The 2020 notification used it to add turnover; the 2025 notification raised the limits from 1 April 2025.
- Current classification does not use employment as a test.
- Classification by notification is still subject to the Advisory Committee step in section 7(4).
Read next
- MSME Classification Under S.O. 1364(E) and Udyam Registration
- MSME Classification: Micro, Small, Medium Criteria
- Section 7 of the MSMED Act, 2006: Classification of enterprises
- Section 8 of the MSMED Act, 2006: Filing of memorandum by micro, small and medium enterprises
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.