The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 provides critical protection to MSMEs in India against delayed payments. It mandates timely payments, prescribes penal interest on defaults, and establishes an institutional mechanism for dispute resolution. Additionally, recent amendments in the Income Tax Act further strengthen compliance by disallowing tax deductions for unpaid MSME dues.
Key Provisions and Deadlines
Payment Window
* With written agreement: Buyers must pay within 45 days of accepting goods or services.
* Without written agreement: Payment must be made within 15 days of acceptance.
Interest Penalties
* For delays, buyers are liable to pay compound interest, calculated monthly, at a rate **three times the RBI Bank Rate.
Income Tax Implications**
* Under Section 43B(h) of the Income Tax Act, buyers cannot claim tax deductions for expenses relating to MSME suppliers if payments are not cleared within the prescribed 45-day period.
How MSMEs Can Seek Redressal
1. Register on MSME Samadhaan
* MSME suppliers with a valid Udyam Registration can lodge complaints for delayed payments on the *MSME Samadhaan Portal** (services.india.gov.in).
2. File a Complaint
* The online platform enables MSMEs to submit claims and track the progress of their cases.
3. MSEFC Intervention
* Complaints are referred to the concerned Micro and Small Enterprise Facilitation Council (MSEFC) at the state level.
4. Council Action
* The MSEFC must resolve disputes within 90 days and can direct buyers to release payments along with accumulated interest.
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Consequences for Buyers
*Financial Penalty: Heavy liability in the form of compound interest on overdue payments.
* Loss of Tax Deduction: Ineligible to claim such expenses under the Income Tax Act.
* Legal Action: MSMEs can escalate matters legally for recovery of dues.
✅ This structure gives clear sections: law requirements → redressal process → consequences.
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