Last reviewed: 2 September 2026. The MSMED Amendment Act, 2026 received Presidential assent on 13 August 2026 — but for most Micro and Small suppliers sitting on an overdue invoice, the more useful question isn't what changed in Parliament, it's how to actually get paid. This is the practical recovery path: the 45-day clock, Section 16 interest, filing on the Samadhaan portal, what the Facilitation Council does with your complaint, and where the 2026 amendment genuinely moves the needle.
Who this remedy is for
Sections 15 to 24 of the MSMED Act, 2006 apply only to a supplier that held Udyam registration as a Micro or Small Enterprise on the date of supply. A Medium enterprise, or a supplier that registered only after the invoice was raised, cannot use the Samadhaan/Facilitation Council route for that particular transaction — though it can still sue for recovery under ordinary contract law, or invoke arbitration if the purchase order provides for it. Keep the Udyam certificate's registration date and the invoice date side by side before filing; a mismatch is the single most common reason a Council rejects a reference at the threshold stage.
The 45-day payment clock
| Situation | Due date | Notes |
|---|---|---|
| Written agreement specifies a credit period | Agreed period, capped at 45 days from acceptance | Any clause promising more than 45 days is void to that extent under Section 15 |
| No written agreement on payment terms | 15 days from acceptance | Applies by default — get terms in writing to get the fuller 45-day window |
| Buyer doesn't formally accept/reject | "Deemed acceptance" 15 days after actual delivery | The 45-day clock then runs from that deemed-acceptance date |
| Buyer raises a written objection within 15 days | Clock restarts from the date the objection is cured | Keep proof of when the objection was resolved — it fixes the real due date |
Interest under Section 16 — a worked example
A Thane-based ancillary unit supplies components worth ₹8,00,000 against a purchase order silent on credit terms, delivered and accepted on 1 April 2026. Payment is received only on 30 September 2026 — a delay of 168 days beyond the 15-day default due date (16 April 2026).
| Component | Figure |
|---|---|
| Principal outstanding | ₹8,00,000 |
| Applicable rate (3× Bank Rate, illustrative ~16.5% p.a.) | 16.5% per annum, compounded monthly |
| Delay period | 168 days (~5.5 months) |
| Approximate interest accrued | ~₹60,000–₹62,000 (monthly-rest compounding pushes this above simple-interest arithmetic) |
Two things trip up suppliers doing this arithmetic themselves: the rate is three times the Bank Rate, not the repo rate directly, and the compounding is monthly, not annual — over a delay running past a year, monthly rests meaningfully outrun a simple-interest estimate. The Samadhaan portal auto-calculates this once you enter the invoice and payment dates; treat the portal figure as authoritative and keep your own working papers only as a cross-check.
What the MSMED Amendment Act, 2026 actually changes
The Bill we covered in our earlier post on the MSME Amendment Bill has now been enacted — Presidential assent came on 13 August 2026. The core recovery mechanism suppliers rely on (Sections 15, 16 and 18) is untouched. What's new:
| Change | Practical effect |
|---|---|
| Mandatory TReDS routing for CPSEs | Central Public Sector Enterprises must settle MSME invoices through an RBI-authorised Trade Receivables Discounting System platform, not by direct bank transfer outside the platform — this creates a time-stamped, auditable settlement trail an MSE can point to in a dispute |
| Extendable mandate | Central/State Governments may notify other public bodies or large-buyer categories into the same TReDS requirement — this sits alongside the pre-existing (Nov 2024) notification requiring corporates and PSUs with turnover of ₹250 crore or more to onboard TReDS |
| Codified Council timelines | Conciliation to conclude within 90 days of the first-appearance date; a further 30 days for the Council to act if it proceeds to a reference; an arbitration award within 90 days of completion of pleadings — tightening the informal "roughly 90 days" practice into text |
| Graded penalty ladder | A warning on a first instance of non-compliance, escalating to fines of ₹10,000 up to ₹1 lakh for repeat defaults — aimed at the paying entity's TReDS/procedural compliance, not a substitute for the Section 16 interest a supplier separately recovers |
The exact commencement date for each provision, and any subordinate rules or MSEFC procedural circulars the Ministry issues to operationalise the codified timelines, were still being notified in tranches as of this review — confirm the current position before citing a specific clause in a legal notice or Council filing.
Filing a Samadhaan complaint, step by step
- Register/log in at samadhaan.msme.gov.in with your Udyam number.
- Enter the buyer's PAN, corporate/GST details, and the invoice(s) in default — the portal is designed around one buyer at a time.
- Upload the purchase order, invoice, delivery/acceptance proof, and any correspondence chasing payment.
- The portal computes the Section 16 interest automatically from the entered dates.
- The complaint routes to the Micro and Small Enterprises Facilitation Council (MSEFC) of the state where your unit is registered, which forwards it to the buyer for a reply.
- No court fee is payable at this stage — this is a statutory, not a civil-suit, remedy.
Inside the Facilitation Council: conciliation, then arbitration
On receiving a Section 18 reference, the Council either conducts conciliation itself or refers the matter to an institution for conciliation under the Arbitration and Conciliation Act, 1996. If conciliation fails, the same Council can take up the matter as arbitrator, or refer it out for arbitration — a structural feature suppliers often don't expect (the conciliator and the arbitrator can be the same forum). The Council's decision is enforceable as a decree or award.
Buyers frequently argue that a purchase order's own arbitration clause should oust the Council's jurisdiction. It does not: Section 24 gives Sections 15–23 an overriding, non-obstante effect over any inconsistent contract term or other law, and the Supreme Court settled this in Silpi Industries v. Kerala State Road Transport Corporation (2021) — a Section 18 reference stands even where the contract carries its own dispute-resolution clause.
Challenging an award — the 75% pre-deposit
A buyer wanting to set aside a Council decree, award or order in court cannot simply file an application: Section 19 requires depositing 75% of the amount in terms of that decree/award/order as a pre-condition before the application is even entertained (the court has some discretion to direct a lesser interim deposit while the appeal is pending, but the statutory default is 75%). This single provision is what gives the MSEFC route real teeth — it is far more expensive for a buyer to contest a Council award than to simply pay the invoice on time.
The income-tax overlay — don't conflate two different disallowances
Clients frequently ask whether Section 43B(h) and the MSMED Act interest disallowance are the same thing. They are not, and mixing them up understates the buyer's real exposure:
- Section 43B(h), Income-tax Act — disallows the unpaid principal owed to an MSE supplier as a deduction until the year it is actually paid, if payment runs past the Section 15 timeline. We cover the buyer-side mechanics and the year-end planning checklist in our companion post on Section 43B(h) buyer-side risk.
- Section 23, MSMED Act — separately and permanently disallows the interest paid or payable under Section 16 as a deduction under the Income-tax Act — this bar applies regardless of whether or when the interest is actually paid.
A buyer that pays the overdue principal in a later year recovers the Section 43B(h) deduction for the principal in that year, but the Section 16 interest component stays disallowed permanently. Factor both into any year-end MSME-vendor ageing review.
Common mistakes we see
- Filing before confirming Udyam registration was live on the date of supply — the Council checks this first.
- Treating the 45-day cap as automatic even when the written agreement is silent — the default without a written agreement is 15 days, not 45.
- Estimating interest on a simple, annual basis instead of monthly-rest compounding — understates the claim, especially past 12 months of delay.
- Assuming an arbitration clause in the PO blocks the Council — it does not, per Section 24 and Silpi Industries.
- Waiting past three years from the due date to file — Council references are also subject to the Limitation Act's general three-year period for a suit on a written contract, so don't sit on a stale claim.
Where our MSME/Udyam classification tool fits in
Before filing anything, confirm your own classification is current — the Micro/Small thresholds decide whether you qualify for this remedy at all. Run your investment and turnover figures through our free MSME/Udyam classification checker to confirm your Udyam category before you file, especially if you've grown close to the Small-to-Medium boundary since your last renewal.
We help MSME suppliers build the Samadhaan filing pack (invoice trail, interest computation, Udyam-date verification) and advise buyers on 43B(h)/Section 23 exposure across their vendor ageing.
MSME 43B(h) payment review CA services for MSMEs Talk to usFrequently asked questions
Who can file a Samadhaan complaint for a delayed payment?
Only a supplier holding Udyam registration as a Micro or Small Enterprise on the date the goods or services were supplied can invoke Sections 15–19 of the MSMED Act, 2006 through the Samadhaan portal. Medium enterprises and unregistered suppliers are outside this specific remedy, though they can still pursue a normal civil recovery suit or, where one exists, an arbitration clause.
What is the deadline for a buyer to pay an MSE supplier?
The period agreed in writing between the parties, capped at a maximum of 45 days from the date of acceptance (or deemed acceptance) of the goods or services. If there is no written agreement, the buyer must pay within 15 days. "Deemed acceptance" kicks in if the buyer does not communicate an objection, in writing, within 15 days of receiving the supply.
How is the interest on a delayed MSE payment calculated?
Section 16 fixes it at three times the bank rate notified by the Reserve Bank of India, compounded monthly from the day after the due date until the date of actual payment. With the RBI repo rate holding at 5.25% through the August 2026 policy review and the Bank Rate tracking roughly 0.25 percentage points above it, the applicable rate works out to approximately 16.5% per annum — always pull the Bank Rate in force on the date of default rather than assuming last year’s figure, since it resets with every bi-monthly monetary policy.
Can a buyer avoid the Facilitation Council by pointing to an arbitration clause in the purchase order?
No. Section 24 of the MSMED Act gives Sections 15 to 23 overriding effect over anything inconsistent in any other law or in the contract between the parties, including a private arbitration clause. The Supreme Court confirmed this in Silpi Industries v. Kerala State Road Transport Corporation (2021), holding that a Section 18 reference to the Facilitation Council survives even where the purchase order carries its own arbitration or dispute-resolution clause.
Does the MSMED Amendment Act, 2026 change the 45-day rule itself?
No — the core Section 15 payment period and the Section 16 interest formula are untouched. The Act, which received Presidential assent on 13 August 2026, instead makes it compulsory for Central Public Sector Enterprises to route MSME invoice settlements through an RBI-authorised TReDS platform, gives the Central and State Governments power to extend that mandate to other notified bodies, and writes explicit stage-wise timelines into the Facilitation Council process along with a graded penalty (a first-time warning, then fines escalating from ₹10,000 to ₹1 lakh) for non-compliance.
Is the interest paid to an MSE supplier deductible for the buyer under the Income-tax Act?
No, and this is separate from Section 43B(h). Section 23 of the MSMED Act independently bars the buyer from claiming the interest payable or paid under Section 16 as a deduction while computing income under the Income-tax Act, 1961 — this disallowance applies regardless of when the interest is actually paid, unlike Section 43B(h), which disallows only the unpaid principal until the year of actual payment. Read our companion post on Section 43B(h) buyer-side risk (linked below) for how the two provisions interact on the same overdue invoice.
What proof does an MSE need before filing on the Samadhaan portal?
The Udyam registration certificate, the buyer’s PAN, copies of the purchase order or work order, invoices with delivery/acceptance proof, and a running statement showing the outstanding principal and the days of delay. The portal auto-computes the Section 16 interest once the invoice date and payment status are entered; keep the underlying calculation on file since the Facilitation Council can ask for it during conciliation.
This article is for general information and does not constitute legal or tax advice. MSMED Amendment Act, 2026 provisions and any subordinate rules were being notified in stages as of the review date above — verify the current commencement status and any state-specific MSEFC circular before relying on a specific clause. This is educational content and not a solicitation; please consult us for advice on your specific facts.