Advantages of registering your business as MSME Enterprise

MSME stands for Micro, Small and Medium Enterprises. These include start-ups and other business initiatives which are comparatively small in budget and have limited operations.

Micro, Small and Medium Enterprises (MSMEs) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. MSMEs not only play a crucial role in providing large employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural & backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income and wealth. MSMEs are complementary to large industries as ancillary units and this sector contributes enormously to the socio-economic development of the country.

MSMEs are categorized as:

• Manufacturing Enterprises: The enterprises engaged in the manufacturing or production of goods. The Manufacturing Enterprises are defined in terms of investment in Plant & Machinery and turnover.
•  Service Enterprises: The enterprises engaged in providing or rendering services and are defined in terms of investment in equipment and turnover.

Apart from other general benefits that may be available to MSMEs like easy access to credit, reduced interest rates, industrial promotion subsidy, electricity bill concessions, tax concessions, etc, the MSMEs benefit much from ease of recovery of debt and dues from defaulting buyers.

On 30th October 2017, the Ministry of Micro, Small & Medium Enterprises launched MSME Samadhaan. MSME Delayed Payment Portal or MSME Samadhan was launched expressly to empower micro and small entrepreneurs across the country.

The MSME Samadhaan portal enables the MSMEs to directly register their cases about delayed payments against the buyer of goods / services before the Micro and Small Enterprise Facilitation Council (MSEFC).

MSMED Act, 2006

Micro, Small and Medium Enterprise Development or the MSMED Act, 2006 (‘Act’) includes provisions that deal with the cases of delayed payments to MSMEs. According to these provisions, a buyer is liable to pay a compounded fine, if he/she fails to make a payment to the supplies within 45 days from the day of acceptance of the goods / service. The fine is compounded monthly on the amount at three times the bank rate notified by the Reserve Bank of India (RBI).

As per sections 20 and 21 of the Act, State Governments must establish Micro and Small Enterprise Facilitation Council (MSEFC) for the settlement of disputes for the filing of delayed payments. Any MSME with a valid Udyog Aadhar (UAM) or Udyam Registration can apply for such facilitation. Every reference made to the MSEFC shall be adjudicated within 90 days from the date of making such a reference. The provisions of this Act are implemented by the MSEFC which is chaired by the Director of Industries of the respective State/UT.

Section 16 of the Act states the buyer is liable to pay interest with the monthly rests to the supplier in case of non-payment or delayed payment. The interest is compounded at three times the bank rate notified by the RBI. If the appellant filing the case is not a supplier and still wishes to file an appeal, he/she must set aside 75% of the award amount before the court begins deciding any such case.

To file an appeal against an award passed under the MSMED Act, 2006, you must follow the provisions of Section 19 of the MSMED Act and Section 34 of the Arbitration and Conciliation Act, 1996: 

• You must deposit 75% of the award amount with the court.
• The court may order the deposited amount to be paid to the supplier if it deems it reasonable.
• The court may impose any conditions it deems fit.

 The MSMED Act was enacted to promote and develop Micro, Small and Medium Enterprises. Section 19 of the MSMED Act ensures that awards passed under Section 36 are final in a timely manner.