Date:May 25, 2023
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:
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.
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.
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.
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.
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.