Government Takes Steps to Eliminate Delayed Payments

By Tanya Yadav --
Friday, 19 Jul, 2024

The government has taken a big step to help micro, small and medium-sized businesses (MSEMs) get paid on time. The Ministry of Corporate Affairs (MCA) has introduced a new rule that requires all companies to report how they pay these smaller businesses.

Companies now have to fill out a form called MSME-1 twice a year. This form asks for details about payments made to MSMEs, including how much was paid on time (within 45 days), how much was paid late, and reasons for any delays. This rule applies to all companies that work with MSMEs, even if they don't have any late payments.

Mr. Vinod Kumar, President, India SME Forum, says this is a "watershed moment" that could help stop the problem of delayed payments, which has been a gigantic problem for small businesses for years.

The government has been trying to help MSEMs in other ways too. In the last budget, they changed tax rules to encourage companies to pay MSMEs within 45 days. This rule was implemented in April 2024 and aimed to help small businesses manage their money better.

However, not everyone agrees with these changes. Some bigger companies in certain industries are asking the government to reconsider the 45-day payment rule. They want more time to be discussed in the next budget. Some small businesses are also worried that these rules might cause larger companies to work with unregistered MSMEs instead, to avoid the new regulations.

Government Takes Steps to Eliminate Delayed Payments. The government has taken a big step to help micro, small and medium-sized businesses (MSEMs) get paid on time. The Ministry of Corporate Affairs (MCA) has introduced a new rule that requires all companies to report how they pay these smaller businesses.

Companies now have to fill out a form called MSME-1 twice a year. This form asks for details about payments made to MSMEs, including how much was paid on time (within 45 days), how much was paid late, and reasons for any delays. This rule applies to all companies that work with MSMEs, even if they don't have any late payments.

Mr. Vinod Kumar, President, India SME Forum, says this is a "watershed moment" that could help stop the problem of delayed payments, which has been a gigantic problem for small businesses for years.

The government has been trying to help MSEMs in other ways too. In the last budget, they changed tax rules to encourage companies to pay MSMEs within 45 days. This rule was implemented in April 2024 and aimed to help small businesses manage their money better.

However, not everyone agrees with these changes. Some bigger companies in certain industries are asking the government to reconsider the 45-day payment rule. They want more time to be discussed in the next budget. Some small businesses are also worried that these rules might cause larger companies to work with unregistered MSMEs instead, to avoid the new regulations.