Lok Sabha Question No. 91 (UNSTARRED), answered on 2024-11-25
Subject: Payment to SMEs by Big Companies
Ministry: FINANCE
Asked by: Thiru Arun Nehru

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE

## LOK SABHA UNSTARRED  QUESTION NO. 91

TO BE ANSWERED ON MONDAY, NOVEMBER 25, 2024/AGRAHAYANA 4, 1946 (SAKA)

## PAYMENT TO SMEs BY BIG COMPANIES

## 91. THIRU ARUN NEHRU:

## Will the Minister of FINANCE be pleased to state  :

- (a) whether the Government is aware that the 45 day deadline for payment to SMEs by big companies has been causing loss of business to SMEs; and
- (b) if so, the action proposed by the Government to resolve the payment issue to SMEs and to ensure that their businesses are not adversely affected?

## ANSWER

## THE MINISTER OF STATE IN MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY)

(a)  &  (b)  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. This provision has been there in the MSMED Act, 2006 since the time of its coming into force on 6.6.2006.

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. So far, 159 MSEFCs have been set up, with more than one MSEFC set up in States like Delhi,  Jammu  &  Kashmir,  Karnataka,  Kerala,  Maharashtra,  Punjab,  Rajasthan,  Tamil  Nadu,  Telangana, Uttar Pradesh and West Bengal.

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. 250 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.

A number of Micro, Small and Medium Enterprises (MSME) associations have endorsed the intervention introduced in the  budget last  year  to  ensure  timely  payments  as  being  beneficial  to  the  Micro  and  Small enterprises, which were grappling with the issue of delayed payments, cash flow and the risk of business getting closed due to financial constraints.

The above measures aim to provide timely payments to Micro and Small enterprises.

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