Lok Sabha Question No. 95 (UNSTARRED), answered on 2024-07-22
Subject: Streamlining Payment Process between Large Companies and MSMEs
Ministry: FINANCE
Asked by: Shri Haribhai Patel

## GOVERNMENT OF INDIA MINISTRY OF FINNANE DEPARTMENT OF REVENUE

## LOK SABHA UNSTARRED QUESTION No. 95

TO BE ANSWERED ON MONDAY, JULY 22, 2024/31 ASHADHA, 1946(SAKA)

## STREAMLINING PAYMENT PROCESS BETWEEN LARGE COMPANIES AND MSMEs

## 95. SHRI HARIBHAI PATEL:

Will the Minister of FINANCE be pleased to state:

- (a) whether  the  Government  has  taken  adequate  measures  for  streamlining  the  payment  process and  ensure  timely  settlements  between  large  companies/  traders  and  the  Micro  and  Small Enterprises (MSE) Sector, fostering a fair business environment;
- (b) if  so,  the  stipulated  timelines  which  are  to  be  adhered  by  the  large  companies/  traders  along with the implications/penalties for delays in payments to MSMEs; and
- (c) whether the Government has contemplated the implications of the aforesaid measures, if any, on the businesses and if so, the details thereof?

## ANSWER

## THE MINISTER OF STATE FOR FINANCE (SHRI PANKAJ CHAUDHARY)

(a), (b) and (c): Section 15 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 provides that payments to micro and small enterprises shall be within the time as per the written agreement, which cannot be more than 45 days. If there is no such written agreement, it is provided that the payment shall be made within 15 days.

Under the provisions of the MSMED Act, 2006, Micro & Small Enterprises Facilitation Councils (MSEFCs) have been set up in the States/Union Territories to deal with cases of payments of the Micro and Small Enterprises (MSEs) delayed by buyers. Further measures are contained in sections 16 and section 23 of MSMED Act 2006.

Ministry  of  MSME  launched  Samadhaan  Portal  for  filing  of  grievances  and  for  monitoring  of  the outstanding  dues  to  Micro  and  Small  Enterprises  (MSEs)  from  the  buyers  of  goods  and  services  and created a special sub-portal within Samadhaan Portal for reporting the dues and monthly payments by Central  Ministries/Department/Public  Sector  Enterprises  to  Micro,  Small  and  Medium  Enterprises (MSMEs).

Government  of  India  has  also  instructed  Central  Public  Sector  Enterprises  (CPSEs)  and  all companies with the turnover of Rs. 500 Crore or more to get themselves on-boarded on the Trade Receivables Discounting System (TReDS), an electronic platform for facilitating the discounting of trade receivables of MSMEs through multiple financiers.

Companies  which  get  supplies  of  goods  or  services  from  MSEs  and  whose  payment  to  MSEs exceeds  45  days  from  the  date  of  acceptance  or  the  date  of  deemed  acceptance  of  the  goods  or services,  also  need  to  submit  a  half  yearly  return  to  the  Ministry  of  Corporate  Affairs  stating  the amount of payments due and the reasons of the delay.

Vide Finance Act 2023, clause (h) was inserted in Section 43B of the Income-tax Act 1961 to provide that any sum payable by the assessee to a micro or small enterprise beyond the time limit specified in section 15 of the MSMED Act 2006 shall be allowed as deduction only on actual payment. It can be allowed on accrual basis if the payment is within the time mandated under section 15 of the MSMED Act, 2006.

The above measures aim to promote timely payments to micro, small and medium enterprises.

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