MSME Act proposed to be amended to ensure expeditious payments

New Delhi: The government plans to amend the Micro, Small and Medium Enterprises (MSME) Development Act, 2006 to ensure expeditious payment to MSMEs, said people familiar with the matter. The Act is likely to be amended to make the 45-day payment rule more effective by introducing online dispute resolution to settle delayed payments disputes, they said.

The law prescribes a 45-day window for buyers to pay their MSME suppliers. If the buyers fail to pay within this time frame, they are liable to pay the amount and interest on the pending amount, which is calculated at three times the Reserve Bank of India's bank rate. The government believes that the law fails to reflect the contemporary challenges that MSMEs face, the people said.

"The amended Act will incorporate concepts such as energy efficiency and decarbonisation, embodying the developmental direction MSMEs need to adopt," said a government official, who did not wish to be identified. The government is also expected to streamline the income tax provisions in line with the proposed changes.


Export Focus
In addition, the government is planning to set up centres of excellence to facilitate MSME exports. A NITI Aayog report earlier this year said that merely 0.95% or about 150,000 of the 15.8 million registered MSMEs claimed to export their goods and services. The proposed centres would seek to bridge the information gap, officials said, adding that these centres are likely to facilitate the exchange of information through collaboration between MSMEs and the Department of Science & Technology as well as the Council of Scientific and Industrial Research for promoting and adopting best technology best practices. These measures top the agenda of the ministry for the first 100 days of the government. "The 100-day action plan is forward-looking and a bridge for achieving the 2047 Viksit Bharat goals," said an official.