MSME Act: proposed changes to ensure expeditious payments

22 Jul 2024 CW Team

Government plans to amend the Micro, Small and Medium Enterprises (MSME) Development Act, 2006 to ensure quicker payments to MSMEs. The proposed amendments aim to enhance the effectiveness of the 45-day payment rule by introducing online dispute resolution for settling delayed payment disputes.

The existing law mandates a 45-day period for buyers to pay their MSME suppliers. If payments are not made within this timeframe, buyers are required to pay the outstanding amount along with interest, calculated at three times the Reserve Bank of India's bank rate. The government believes the current law does not adequately address the contemporary challenges faced by MSMEs.

A government official, who preferred to remain anonymous, mentioned that the amended Act will include concepts such as energy efficiency and decarbonization, reflecting the developmental direction needed for MSMEs. The government is also expected to align income tax provisions with the proposed changes.

Additionally, the government plans to establish centres of excellence to support MSME exports. A report from NITI Aayog earlier this year revealed that only about 0.95% of the 15.8 million registered MSMEs export their goods and services. The new centres are intended to bridge this information gap and facilitate collaboration between MSMEs, the Department of Science & Technology, and the Council of Scientific and Industrial Research to promote and adopt best technological practices. These initiatives are among the key priorities for the ministry's first 100 days. An official stated that the 100-day action plan is designed to be forward-looking and to help achieve the 2047 Viksit Bharat goals.

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