Delayed payments to SMEs to cost corporates dear

NEW DELHI: Large companies that source inputs from small and tiny enterprises will now have to pay within 45 days of procurement, irrespective of any written agreement between the them.

With Parliament giving its assent to the Micro, Small & Medium Enterprises Development (MSMED) Bill, large-scale enterprises will have to pay an interest rate of 18%, which is three times the prevailing bank rate of RBI, on delayed payments.

This apart, a new set of rules and regulations will now govern the small-scale sector. Small-scale and medium enterprises have been freed from the hassle of registering their units and have also been given the option to shut shop if the business is not profitable. Sick units in the sector have not been allowed to exit easily as they require clearances on labour standards, sales tax registration and partnership-related issues.

SSIs don’t require registration as the Bill has already become an Act. A memorandum with the government is optional, in case the unit wants to apply for concessions. As far as medium enterprises are concerned, manufacturing units will need to sign a memorandum with the government while those operating in the services sector need not do so.

The Act also provides for the setting up of a facilitation council for settling disputes regarding delayed payments by medium and large-scale enterprises to SSIs.

However, the Act stipulates that no appeal against the order of the council will be entertained by any court without the deposit of 75% of the decreed amount.

This has been done to protect small and tiny enterprises that often turn sick due to huge dues.