How to Remain Safe from the Delayed Payment Challenge, Must-to-Adopt Practices for MSMEs: SMEStreet Report

In India, the issue of delayed payments has been a longstanding concern, particularly for Micro small and medium-sized enterprises (MSMEs). To address this problem, the Indian government has taken several measures to promote prompt payments and protect the interests of businesses. Here are some key initiatives and regulations in place:

1. The Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006: This act aims to facilitate the promotion, development, and enhancement of competitiveness of micro, small, and medium enterprises. It includes provisions for mandatory disclosure of information regarding payment terms and imposes penalties on buyers for delayed payments to SMEs.
2. The Public Procurement Policy for MSEs, 2012: This policy mandates that central government ministries, departments, and public sector undertakings (PSUs) procure a certain percentage of their goods and services from micro and small enterprises (MSEs). It includes provisions to ensure that payments to MSEs are made within a specified timeframe.
3. Trade Receivables Discounting System (TReDS): TReDS is an electronic platform that facilitates financing and discounting of invoices/bills of MSMEs. It allows MSMEs to upload their invoices on the platform, and financiers can bid on them, providing early payment to MSMEs and reducing the risk of delayed payments.
4. Insolvency and Bankruptcy Code (IBC), 2016: The IBC provides a time-bound and streamlined process for resolving insolvency issues. It includes provisions for initiating insolvency proceedings against defaulting companies, ensuring a quicker resolution and recovery of dues.
5. Online portals and grievance redressal mechanisms: Various government portals and online platforms have been set up to address payment-related grievances. These platforms enable businesses to register their complaints and seek resolution for delayed payments.
6. Awareness campaigns and capacity building: The government, along with industry associations, conducts awareness campaigns and training programs to educate businesses about their rights and obligations regarding prompt payments. These initiatives aim to empower businesses and promote a culture of timely payments.

While these measures have been implemented to address the delayed payments problem in India, challenges still persist. Enforcement and compliance remain key areas of focus. Continued efforts to streamline payment processes, enhance access to finance for MSMEs, and create awareness about legal remedies are necessary to further mitigate the issue of delayed payments in India.

Also Read: The MSME Focus in Union Budget 2023-24

The 43B MSME Act Factor

A new development in 43B MSME Act, from 1st April 2023 in the New MSME Act is already introduced.According to this, if any invoice date passes 45 days and the client has not paid the amount then from 46th day onwards it will show as profit in clients book and the client is bound to pay 30% tax on it and double the penalty of the amount and it will happen automatically by the system. I ncase the MSME have invoiced to big company which does not fall in MSME category then that MSME need to have MSME Certificate number and as the GST number is mentioned on invoice. The MSME need to mention MSME number also on all the invoices so that tracking can be made easy and if the MSME don't receive payment in 45 days then the client's books will be checked and neccessory action will be prompted

SMEStreet's Recomendations: The core takeaway of the matter is: MSMEs now need to mention their MSME Certificate Registration number on all Invoices.

Solution called MSME Samadhan

MSME Samadhan is a portal launched by the Indian government to address the issue of delayed payments to micro, small, and medium enterprises (MSMEs). It serves as a platform for MSMEs to file their grievances related to delayed payments and seek resolution. Here's how MSME Samadhan is helping in the delayed payment issue:

1. Grievance Registration: MSMEs facing delayed payments can register their complaints on the MSME Samadhan portal. They need to provide details such as the name of the buyer, invoice details, amount due, etc., along with supporting documents.
2. Monitoring and Follow-up: Once a complaint is registered, the portal facilitates the monitoring and follow-up of the case. It enables MSMEs to track the progress of their complaint and receive updates regarding the status of their case.
3. Facilitation and Coordination: MSME Samadhan acts as a facilitator between the MSMEs and the concerned parties, such as the buyer and the relevant government departments. It assists in coordinating communication and resolution efforts.
4. Timely Disposal: The portal ensures that the grievances filed by MSMEs are addressed in a time-bound manner. It sets a maximum timeline for resolving the complaint and ensures that the concerned parties take appropriate action within the stipulated time.
5. Feedback Mechanism: MSME Samadhan allows MSMEs to provide feedback on the resolution of their complaints. This feedback helps in monitoring the effectiveness of the grievance redressal process and making improvements if required.
6. Information and Awareness: The portal also serves as a repository of information and resources related to delayed payment issues. It provides guidance, FAQs, and relevant documents to educate MSMEs about their rights and available legal remedies.

MSME Samadhan plays a crucial role in providing a structured mechanism for MSMEs to report delayed payment issues and seek resolution. It helps in streamlining the complaint process, reducing the turnaround time for dispute resolution, and increasing transparency in payment-related matters. By providing a centralized platform and ensuring accountability, MSME Samadhan aims to promote prompt payments and protect the interests of MSMEs in India.