MSME FAQ Uncategorized

MSME guidelines for payment – under MSME Act

MSME guidelines for payment

MSME Law Notes by NB Associates

The MSME Act, or the Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006, is an Indian legislation that provides guidelines and regulations for the promotion, development, and enhancement of competitiveness of micro, small, and medium enterprises in India.

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The act includes provisions related to various aspects of MSMEs, including payments. Here are some key guidelines regarding payment under the MSMED Act:

Timely payment

The act mandates that the buyer is required to make the payment to the supplier of goods or services from the micro or small enterprise on or before the agreed-upon date or within 45 days from the acceptance of the goods or services, whichever is earlier.

Interest on delayed payment

In case the buyer fails to make the payment within the stipulated timeframe, they are liable to pay compound interest with monthly rests to the supplier. The interest rate is three times the bank rate notified by the Reserve Bank of India or the rate specified in the agreement, whichever is higher.

Written agreement

It is advisable for both the buyer and the supplier to have a written agreement or contract specifying the payment terms and conditions, including the payment due date, interest on delayed payment, and any other relevant terms.

Filing a complaint

If the payment is not made by the buyer within the specified timeframe, the supplier can file a complaint under the MSMED Act. The complaint can be filed with the Micro and Small Enterprise Facilitation Council (MSEFC) established under the act.

MSEFC dispute resolution

The MSEFC is responsible for resolving disputes related to delayed payments between the buyer and the supplier. The MSEFC will examine the matter and pass appropriate orders, which may include directing the buyer to make payment along with interest.


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