What is an MSME?
MSMEs serve as auxiliary units to large companies and make a substantial contribution to the country’s inclusive industrial growth. The MSMEs are expanding their sphere of influence across economic sectors and generating a wide range of goods and services to satisfy domestic and international markets.
| CLASSIFICATIONS | BASED ON PLANT & MACHINERY | ANNUAL TURNOVER | |
| Manufacturing Sector (Investment in Plant & Machinery) | Services Sector (Investment in Equipment’s) | Common for both Manufacturing and Services Sector | |
| MICRO | UPTO 25 LAKHS | UPTO 10 LAKHS | UPTO 5 CRORES |
| SMALL | MORE THAN 25 LAKHS BUT LESS THAN 5 CRORES | MORE THAN 10 LAKHS BUT LESS THAN 2 CRORES | MORE THAN 5 CRORES BUT LESS THAN 75 CRORES |
| MEDIUM | MORE THAN 5 CRORES BUT LESS THAN 10 CRORES | MORE THAN 2 CRORES BUT LESS THAN 5 CRORES | MORE THAN 75 CRORES BUT LESS THAN 200 CRORES |
What is MSMED Act?
The MSMED Act is a law approved by the Indian Parliament with the goal of promoting, growing, and improving the competitiveness of micro, small, and medium-sized businesses. According to the Act, the Buyer’s initial obligation under the MSMED is to complete all payments prior to the time period agreed upon or, if no such agreement is made and the MSME is still entitled to payment, 45 days following the date of acceptance of the products or services. The buyer is responsible for paying a compound interest rate equal to three times the bank lending rate for any products and services provided if they fail to comply. This ensures that payments made to the MSME are subject to a time limit. Failure to make such payment may result in a referral to the Micro and Small Business Facilitation Council (MSEFC), which must make a decision within 90 days of the referral date.
Provision Under MSMED Act for Recovery of Debts?
The Indian government has created a number of Acts to assist MSMEs in recouping various payment obligations from private businesses, PSUs, and independent business owners. One statute to support MSMEs is the MSMED Act, which aids in prompt payment recovery from irritable customers.
If the buyers don’t make payment within 45 days, there are a number of steps that can be taken against them in accordance with this Act.
What is Micro and Small Enterprise Facilitation Council (MSEFC) ?
The MSMED Act established the Micro and Small Business Facilitation Council (MSEFC) to address issues pertaining to any sum owed by the customer for products and services delivered. MSEFC has between 2 and 5 members.
What is the Procedure for Recovery under MSEFC?
Both parties receive online notification when an issue is referred to the MSEFC. With conciliation, both sides are given the chance to reach a mutually beneficial agreement. If the conciliation process fails, the MSEFC decides whether to accept the case as is or to reject it; if accepted as is, the case is referred to arbitration. A decision by MSEFC is final and enforceable.
What is MSME SAMADHAN?
The online platform MSME SAMADHAAN was launched on October 30, 2017, and as of October 31st, there have been 13091 cases submitted with the MSEFC, of which 3145 have been resolved, awarding a total of 598.83 Crores3. There were 39,769 applications submitted by MSEs in total, many of which have had successful resolutions. Gujarat (2938 instances) and Rajasthan (1680 cases) have both had the most MSME delayed payment cases filed against them (1337 cases). Tamil Nadu in South India has the most cases filed (909), with over half of those cases already being resolved.
In accordance with Sections 15 to 24 of the MSMED Act, buyers may be sued for failing to make payments after 45 days of the purchase by contacting the MSEFC via the MSME SAMADHAAN Portal (http://samadhaan.msme.gov.in/).
DUCTUS EDGE 