Corporate

MSME and Delayed payment

The Government of India enacted the Micro, Small and Medium Enterprises Development Act, 2006 (the Act) to ensure timely and smooth flow of credit to micro, small, and medium enterprises (MSMEs) and minimize sickness among them. The Act strengthens the provisions relating to delayed payments to the MSMEs by specifying the maximum credit period and higher penal interest if delayed beyond that period. Section 15 of the Act states that where the supplier supplies goods or renders any services to any buyer, then the buyer shall make payment on or before the date mentioned in the agreement and, if there is no agreement, then before the appointed date. The proviso to this section states that the period of credit given by the seller, as mentioned in the agreement, shall not exceed 45 days from the day of acceptance or from the date of deemed acceptance. Further, according to section 16 of the Act, if a buyer fails to make the payment within the stipulated date, it will be liable to pay compound interest with monthly rests on the outstanding amount additionally. The interest shall be calculated from the appointed date at three times of the bank rate notified by the Reserve Bank of India (RBI). However, in case of any dispute regarding the payment of principal or interest between the supplier and the borrower, reference shall have to be made to the Micro and Small Enterprises Facilitation Council (MSEFC) constituted by the respective state governments. The Government has also launched an online delayed payment monitoring system called the MSME Samadhaan for the ease of filing an application to the MSEFC. Any MSME, having a valid Udyog Aadhaar (UAM) can make an application in this portal.

After an application is made by an MSME, the MSEFC shall examine the case and then issue directions to the buyer unit for payment of due amount along with the interest. From the date of launch of MSME Samadhaan portal, i.e. 30 October 2017, MSMEs have filed 2927 applications related to delayed payments These cases involve an amount of Rs.744.65 crores. This portal has also helped get the delayed payments getting settled mutually between seller and buyer. 105 mutual settlements have been carried out amounting to a total of Rs. 8.87 crores. Applications are getting converted to cases by MSE-Facilitation Councils in respective states. 264 applications have been converted to cases as on 31 January 2018. This has empowered the MSMEs to file their delayed payments cases directly. This is being monitored by respective Ministries/ central public sector enterprises and state governments. Section 22 of the Act states that the buyer, who buys goods or avails services from the MSMEs, and is required to get its annual accounts audited, has to mandatorily disclose the following additional information in its annual statement of accounts.

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