Date:April 12, 2023
MSME rules for payment
MSME Law notes by NB Associates
MSME (Micro, Small and Medium Enterprises) rules for payment refer to the regulations and guidelines that govern the payment terms and conditions for transactions between MSMEs and their buyers.
The Indian Government has set up specific rules for payments to be made to MSMEs, which are outlined in the MSME Development Act, 2006.
As per the MSME rules, the buyer is required to make the payment to the supplier for the goods or services rendered within a maximum period of 45 days from the date of acceptance or the deemed acceptance of the goods or services.
In case of delay in payment, the buyer is liable to pay interest at a rate which is three times the bank rate notified by the Reserve Bank of India.
The MSME supplier can also file an application before the Micro and Small Enterprises Facilitation Council (MSEFC) in case of non-payment or delayed payment by the buyer.
If there is no agreed credit period between the supplier and the buyer then payment is to be made within 15 days.
If there is an agreed credit period which is within 45 days then the payment has to be made within the agreed credit period.
If there is an agreed credit period which is more than 45 days, then notwithstanding the agreement the payment has to be made within a period of 45 days.
Section 15 of the MSMED Act prescribes that the payment by the buyer has to be made before 15 days of the date of delivery and if there is any agreement this period should not exceed 45 days .
Section 15 reads as under :
15. Liability of buyer to make payment.—Where any supplier supplies any goods or renders any services to any buyer, the buyer shall make payment therefor on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day:
Provided that in no case the period agreed upon between the supplier and the buyer in writing shall exceed forty-five days from the day of acceptance or the day of deemed acceptance.
Section 16 of the MSMED Act provides that the buyer is liable to pay compound interest with monthly rest at the rate three times the bank rate notified by RBI.
Section 16 reads as under :
16. Date from which and rate at which interest is payable.—Where any buyer fails to make payment of the amount to the supplier, as required under section 15, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank.
If the payment is not made, the supplier can approach MSME Facilitation Council under sections 17 and 18 of the MSME Act for the recovery of the payment.
Overall, the MSME rules for payment are designed to ensure that MSMEs are paid on time for their goods or services and to promote their growth and development.