The Micro, Small, and Medium Enterprise Development (MSMED) act 2006 includes measures for dealing with late payments to micro and small businesses (MSEs). If the buyer is not able to pay the supplier for the supplies of their goods or services within the time period of 45 days of acceptance of the goods/services or the scheduled day of acceptance, then the buyer is required to pay compound interest to the supplier on the payable amount up to three times. The amount is set by the Reserve Bank of India (RBI) on a monthly basis.
State governments form a Micro and Small Enterprise Facilitation Council (MSEFC) to address issues related to obtaining references and filing records of Delayed Payments (Chapters 20 & 21). Any small or micro business with a valid Udyog Aadhar (UAM) number is eligible to file a case regarding a payment issue. After reviewing the case submitted by the MSE unit, the State's MSEFC will issue directions to the buyer unit for payment of the required amount.
Also, this interest is in line with the MSMED Act 2006. Every recommendation to MSEFC must be considered within the period of ninety days of the date of the referral, according to the Act.
Did you know?
More than 32% of MSMEs have been operating for more than two decades, and about 1.22% have been around for more than five decades?
MSME Samadhan Portal
The Ministry of MSME has launched an initiative that allows a supplier, also known as the MSE unit, to file an online complaint against a buyer of products or services with the relevant MSEFC in their state/UT. The MSEFC Council will look into the matter and the rules and regulations will be available for proactive action by concerned Departments, CPSEs, Central Ministries, State Governments, and others to proceed with the sanction of interest if the complaint is legitimate.
- Entrepreneurs/MSEs can use the platform to file online applications for delayed payments: To file an application, the user must have a Udyog Aadhaar Number that has been authenticated with the actual Aadhaar card.
- Examine the case status: MSMEs and entrepreneurs can use the portal to look up the status of their online applications for delayed payments.
- Pending Payments Dashboard: The Portal will provide information on pending payments between MSEs and specific CPSEs, Central Ministries, State Governments, and so on. PSE, CEOs and Secretaries of the Ministry in question would be responsible for keeping track of delayed payments instances under their authority and making the necessary directions to resolve the issues related to it.
Provisions to Be Established by the State Government
Resolving delayed Payment to Micro and Small Enterprises is a provision in the Act of 2006, Micro, Small, and Medium Enterprise Development (MSMED). This provision comes under chapters 15-24 of this act. Micro and Small Enterprise Facilitation Council (MSEFC) needs to be established by every state government to address issues about acquiring references and filing records of Delayed Payments. This information is also clearly mentioned in Chapters 20 and 21 of the MSMED act.
Nature of Assistance Provided By MSEFC
After reviewing the case submitted by the MSE unit, the State's MSEFC will issue directions to the buyer unit for payment of the required amount plus the acquired interest, following the provisions of the MSMED Act 2006.
Who is Eligible to Apply?
Any micro or small business with a valid Udyog Aadhar (UAM) number or anyone with a legitimate Udyog Aadhar (UAM)/Udyam Registration can file an online complaint with the relevant MSEFC of their State/UT against the buyer/purchaser of goods/services. The MSEFC Council will consider these applications very carefully. These applications will also be accessible to the concerned central ministries, CPSEs, departments, and state governments.
If the buyer does not pay the supplier for their supplies of goods or services within 45 days of the acceptance of goods/services, then The buyer must pay compound interest as well as monthly interest on the amount at three times of the RBI's published bank rate. This provision is mentioned in chapter 16 of the 2006 MSMED act. State governments are required to notify all the Authorities for Filing Entrepreneur Memorandum, MSEFC Rules, (ii of chapter 16) and MSEFC Constitution (iii of chapter 16).
According to the provisions of the MSMED Act 2006, all States/UTs have notified the central government Authorities for Filing Entrepreneurs Memorandum, MSEFC rules, and MSEFC constitution. This includes 33 States/UTs (excluding Arunachal Pradesh, Assam, and Manipur). All these states have notified MSEFC rules, and all 36 States/UTs have put in place MSEFCs.
Every recommendation to MSEFC must be considered within ninety days of the date of the referral, according to the Law.
If the Appellant (who is not the supplier) wishes to file an appeal, no court will consider an application to set aside any MSEFC decree or award unless the appellant (who is not the supplier) has paid the MSEFC 75 percent of the levied amount (Chapter 19).
Who is Responsible for Carrying Out the Provisions Set in the MSMED Act of 2006?
The MSEFC, which is led by the Director of Industries of the State/UT and also in charge of the MSE units, is responsible for carrying out the provisions of the act. State governments/UTs are urged to guarantee that the MSE Facilitation Council meets on a regular basis and that delayed payment issues are resolved by the Councils within 90 days, as required by the MSMED Act of 2006.
MSME Samadhan Portal
The Ministry of MSME has launched an online application portal for suppliers to file complaints against buyers of products and services with the relevant MSEFC in their state or territory. The MSEFC Council will take a look at these and decide what to do with them. Concerned Central Ministries, Departments, CPSEs, State Governments, and others will be able to see this information in order to take proactive measures.
In the case of non-payment or delayed payment, Section 16 of the Act says that the buyer must pay interest with the monthly reminders to the provider. The interest is compounded three times the RBI's bank rate. If the appellant is not a supplier but still decides to file an appeal, they must first set aside 75% of the levied amount before the court can proceed to decide the matter.
Compensation Provided to Small and Medium-Sized Enterprises (SMEs)
Following an investigation of the case filed by an MSME, the State's MSEFC may issue orders to the buyer for full payment of the due amount along with the interest.
How to Submit an Application on the MSME Samadhan Portal?
The following is the procedure for MSMEs to submit an application to the MSMEs Samadhan Portal:
- Go to MSME Samadhan's website.
- On the upper left-hand side of the homepage, click the 'Case Filing for Entrepreneur/MSE Units' option.
- A new window will appear. Choose between 'Udyog Aadhaar Number' and 'Udyam Registration Number.'
- Click the 'Validate Udyog Aadhaar' or 'Validate Udyam Registration' button after entering the Udyog Aadhaar/Udyam Registration Number and your mobile number.
- An OTP will be emailed to the email address used to register for Udyog Aadhaar/Udyam number.
- Fill out the OTP and submit the application for delayed payment.
- Submit the application after uploading the documents (scanned PDF documents of Respondent's work orders and invoices created by you against those work orders).
The micro, small, and medium-sized enterprise (MSME) sector is the backbone of the Indian economy. This sector has shown to be critical to the nation's prosperity, leveraging exports, and producing a large number of job opportunities for the unskilled, recent graduates, and underemployed people. It also gives banks several options to provide credit to MSME businesses. The government should pay special attention to the importance of MSME in terms of offering more and more MSME Registration benefits by enacting improved rules that allow financial institutions to provide more credit at lower interest rates, ensuring the sector's long-term viability.
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