Last reviewed: 10 August 2026. Parliament has passed the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026 — Rajya Sabha on 3 August and Lok Sabha on 7 August 2026. It is the first major surgery on the MSMED Act, 2006 in years, and it goes straight at the sector’s oldest wound: delayed payments, with an estimated ₹8.1 lakh crore of MSME working capital reported as stuck in receivables and over 2.5 lakh claims worth about ₹55,244 crore pending on the Samadhaan machinery as on 31 December 2025. The 45-day rule does not change — what changes is how quickly, and how forcefully, it can now be enforced. Here is what the Bill actually does, and what suppliers and buyers in Thane, Mumbai and across Maharashtra should do before it is notified.
What the Amendment does NOT touch
Every buyer’s first question this week has been whether the credit-period rules moved. They have not. Payment remains due within the written agreed period, capped at 45 days from acceptance or deemed acceptance (15 days where nothing is agreed), and default continues to attract compound interest at three times the RBI bank rate with monthly rests — which is not tax-deductible for the buyer. The income-tax side is also untouched: amounts unpaid to micro and small suppliers beyond the Section 15 timeline are still disallowed under Section 43B(h) in the buyer’s computation. The classification limits in force since 1 April 2025 — investment up to ₹2.5 crore/₹25 crore/₹125 crore and turnover up to ₹10 crore/₹100 crore/₹500 crore for micro, small and medium respectively — continue, with Udyam registration as the gateway.
The new recovery ladder — deadlines at every stage
Today a Samadhaan reference can drift for years. The Amendment replaces open-ended conciliation with a staged, clock-driven process:
| Stage | Time limit under the Amendment | What it replaces |
|---|---|---|
| 1. Mediation | To be completed within 90 days of first appearance | Open-ended conciliation before the Facilitation Council |
| 2. Reference to arbitration | Within 30 days of mediation terminating without settlement | No fixed trigger — references often stalled |
| 3. Arbitral award | Within 90 days of completion of pleadings | A general direction to decide in 90 days that pendency had made notional |
| 4. Buyer challenges the award | 75% pre-deposit continues (Section 19); if the set-aside application pends beyond 6 months, at least 50% of the award must be released to the supplier | Deposit alone — money stayed locked while challenges dragged |
| 5. Recovery | Settlements and awards recoverable as arrears of land revenue through the District Collector / Deputy Commissioner or a notified authority | Execution through civil courts — slow and rarely pursued |
Two structural changes back this up. States get flexibility over the composition of MSE Facilitation Councils, clearing the way for district-level or regional benches, sector benches and online hearings — a real change for Maharashtra, where a single-point council has carried one of India’s largest caseloads. And the online dispute-resolution route piloted since 15 October 2025 plugs into this staged timeline rather than running beside it.
What a claim now looks like — worked example
A Thane micro-enterprise fabricator supplies goods accepted on 1 September 2026 against a purchase order with a 60-day credit clause. Section 15 overrides the clause at 45 days, so payment falls due by 16 October 2026. The buyer pays nothing.
- Interest meter: from 17 October 2026, compound interest at 3× the bank rate with monthly rests runs automatically. On a ₹10,00,000 invoice, at an illustrative bank rate of 6% (i.e., 18% p.a., 1.5% monthly), six months of default adds roughly ₹93,443 — and the buyer cannot deduct a rupee of it.
- Recovery clock: reference filed, first appearance in mediation say 1 December 2026 → mediation must close by 1 March 2027 → arbitration reference by 31 March 2027 → award within 90 days of pleadings closing. The whole ladder now fits inside roughly a year instead of three to five.
- Collection: if the buyer challenges, 75% goes on deposit; if the challenge sits beyond six months, at least ₹5,00,000-plus (50% of the award) is released to the fabricator, and the balance is collectible like unpaid land revenue — the Collector’s machinery, not a fresh civil suit.
TReDS becomes non-optional for CPSE supply chains
The Bill mandates that every Central Public Sector Enterprise settle its invoices for goods and services procured from MSMEs through TReDS — the Trade Receivables Discounting System, where an accepted invoice can be discounted and paid at a bid rate within days. If you supply a CPSE (or sit one tier below a vendor who does), onboarding onto a TReDS platform moves from good practice to a working requirement. Factor the discounting cost into pricing, and treat the accepted-invoice discipline (clean PO, GRN, e-invoice) as the entry ticket.
The quieter but useful changes
- Udyam becomes statutory. The registration portal gets permanence in the Act itself as a digital, free and voluntary platform — expect banks, buyers and schemes to lean on it even harder as the single identity for MSME status. If your Udyam data is stale, fix it before the machinery starts using it against you; our Udyam documents checklist covers the update trail.
- Decriminalisation. Penal provisions in the Act give way to graded civil penalties — a warning for a first violation, monetary penalties on repetition — consistent with the Jan Vishwas approach to business laws.
- Classification on a statutory footing. The investment-plus-turnover framework is embedded in the Act, ending the notification-only basis on which limits have moved so far.
Action list — micro and small suppliers
- Get the Udyam certificate current — correct NIC codes, turnover band and bank details; print the Udyam number on every invoice and quote it in POs.
- State credit terms in writing and keep acceptance evidence (delivery challan, GRN, email acceptance) — the 45-day clock and the mediation file both start there.
- Run a receivables ageing at 30/45 days and issue a structured reminder at day 40 citing Sections 15–16 — most payments move without a reference ever being filed.
- Use the machinery when it stalls: Samadhaan/ODR reference with invoice, acceptance proof and interest computation attached; the new deadlines only help files that are complete.
- Reflect interest income correctly in books and returns when awarded — it is taxable in your hands.
Action list — buyers who purchase from MSMEs
- Re-verify vendor Udyam mapping in the vendor master each quarter — micro/small flags drive both the 45-day exposure and your Section 43B(h) disallowance working.
- Hard-wire a 45-day payment calendar for flagged vendors; a missed cycle now compounds three ways — interest, tax disallowance, and a fast-track award.
- Clean up disputed invoices in writing within 15 days of receipt — silence becomes deemed acceptance, and deemed acceptance starts the clock.
- CPSEs and their chains: complete TReDS onboarding and dry-run the accept-discount-settle cycle before commencement is notified.
- Model the cash-flow impact of the 50% interim-release rule on any live MSEFC disputes — the era of parking awards behind a challenge is closing.
Frequently asked questions
Has the MSME Amendment Bill 2026 become law yet?
Parliament has passed it — Rajya Sabha on 3 August 2026 and Lok Sabha on 7 August 2026. It now awaits Presidential assent, and its provisions will commence on the date(s) the Government notifies. The sensible course for both suppliers and buyers is to align processes now rather than wait for the commencement notification.
Does the 45-day payment rule change under the Amendment?
No. The Section 15 ceiling stays exactly where it was — payment within the agreed credit period, capped at 45 days from acceptance or deemed acceptance — and Section 16 interest at three times the RBI bank rate, compounded monthly, also continues. What the Amendment changes is how fast and how effectively an unpaid micro or small supplier can enforce that right.
What is the new dispute-resolution process for delayed payments?
A staged, time-bound ladder: mediation to be completed within 90 days of first appearance; if it fails, reference to arbitration within 30 days of the mediation ending; and the arbitral award within 90 days of completion of pleadings. States also get flexibility on MSE Facilitation Council composition, opening the way to district or regional benches and online hearings.
Can a buyer still stall recovery by challenging the award?
It becomes much harder. Under the existing Section 19, a challenge already requires 75% of the award to be deposited. The Amendment adds that where an application to set aside a decree, award or order stays pending beyond six months, at least 50% of the awarded amount must be paid to the micro or small supplier, and settlements and awards become recoverable as arrears of land revenue through the District Collector.
Are medium enterprises covered by the delayed-payment protections?
No — the delayed-payment protections in Chapter V of the MSMED Act protect micro and small suppliers. Medium enterprises benefit from the wider reforms — the statutory Udyam platform, TReDS expansion and decriminalised compliance — but not the Section 15–18 payment machinery.
What should buyers who purchase from MSMEs do now?
Map every vendor’s Udyam status in the vendor master, run a 45-day ageing report monthly, align the ledger with the Section 43B(h) income-tax disallowance working, and — for CPSEs and their supply chains — prepare for mandatory invoice settlement through TReDS. Faster awards and land-revenue recovery mean payment discipline is no longer optional.
Somesh Chandak & Associates, Thane, advises suppliers on Udyam registration, delayed-payment recovery and Samadhaan references, and helps buyers build 43B(h)-safe vendor processes, ageing controls and TReDS readiness.
MSME / Udyam Advisory 43B(h) Payment Compliance Book a consultationThis article is for general information and education only and is not professional advice. It reflects the MSME Development (Amendment) Bill, 2026 as passed by Parliament on 3 and 7 August 2026 and reported officially; the Bill awaits Presidential assent and its provisions commence on notification, and pendency/locked-capital figures are as reported in cited coverage. Positions are as of 10 August 2026 — please take specific advice before acting.