Enactment

This Act may be called the Micro, Small and Medium Enterprises Development Act, 2006. This Act came into force from 16th June 2006.

Purpose

An Act to provide for facilitating the promotion and development and enhancing the competitiveness of micro, small and medium enterprises and for matters connected therewith or incidental thereto.

Constitution of National Board for Micro, Small and Medium Enterprises

Central Government has established a Board for this Act which head office at Delhi. The Function of the Board is to examine the factors affecting the promotion and development of the micro, small and medium enterprise and review the policies of the Central Government in regards to facilitating the promotion and development and enhancing the competitiveness of such enterprises and make recommendation on it. The composition of the Board consists different department and industries person who represent industries, ministry etc.

Classification of MSME

Note:

1. In case of upward change, an enterprise will maintain its prevailing status till expiry of one year from the close of the FY.
2. In case of downward changes, an enterprise will continue in its present category till the closer of the FY.

Registration Requirement

It is not mandatory to get registration under the said Act but benefits accrue to the enterprises after registration attract Registration and most of the enterprises normally get registration under the Act. Once the registration completed, the certificate will be generated online, upon approval, which is called Udyam Registration Number. Official site is https://udyamregistration.gov.in/

• MSME/Udyam registration process is fully online, paperless, and based on self-declaration.
• There is no requirement for documents or proof for registering an MSME.
• Only the Adhaar Number will be enough for registration.
• PAN & GST linked details on investment and turnover of enterprises will be taken automatically from Government databases.
• Having PAN & GST numbers is mandatory from 01.04.2021.
• And other required information as per the online official portal.

Benefits on Udyam Registration

1. Easy to receive Bank Loan: It is easy to get a bank loan when an organization are registered under the MSME Act. 
2. Protection Against Delay Payment: An enterprise can avail protection if payment is delayed from the buyer’s side and it can seek help under the arbitration and conciliation.
3. 50% discount on Trade Mark Registration: If the company has Udyog Aadhar Certificate then the Govt.fee for trademark registration is reduced up to 50%.
4. Recognition from the customers: Customer can recognize an enterprise easily if it is registered for Udyog Aadhar.
5. 1% exemption on the interest rate on overdraft: Udyog Aadhar certificate allows an exemption for 1% deduction on the overdraft charges.
6. Concession on electricity bills: You will avail concession on electricity bills if you have MSME registration.
7. Recognized under Government of India: Udyog Aadhar certificate is recognized by Govt. of India making it easy for the business to use one. 
8. Exemption under Direct Tax Laws: One is eligible for the Industrial Promotion Subsidy Under MSME Act. 
9. Interest on Delay Payment: Section 16 of the MSMED Act provides that the buyer shall be liable to pay compound interest with monthly interest to the MSME supplier at three times the bank rate notified by the RBI.
10. Interest disallows under IT Act 1961: As per Section 23 of the MSMED Act, interest paid or payable by the buyer to the MSME supplier shall not be allowed as a deduction under the provisions of Income Tax Act, 1961.
11. Facilitation Council: All the states/union territories in India have constituted Micro and Small Enterprise Facilitation Council. Any dispute with regard to the amount due can be referred to said Facilitation Council.
12. Disclosure of default in payment to MSME along with interest in the Financial Statement and report under Income Tax Audit also.

 Payment Terms for MSME

Where suppliers supply any Goods or renders any Services to the any buyer, the buy shall make payment as per agreed payment terms or where there is no any agreed payment term then before appointed day.

Provided that, in no case the suppler and buyer will agree in writing the term of payment which exceed 45 days from the date of acceptance of goods supplied or services rendered.

Note: Appointed day means the day following immediately after the expiry of the period of 15 days from the day of acceptance or the day of deemed acceptance of any goods or any services by a buyer from a supplier.

Day of Acceptance for above purpose means

• Actual delivery of goods or rendering of services OR
• Where objection is made in writing by the buyer with 15 days from the day of the delivery of goods or rendering the services, the day on which such objection is removed by the supplier.

Deemed acceptance means where no objection in writing is made within 15 days from the day of delivery of goods or rendering the services, the actual delivery of goods or rendering the services will be deemed acceptance.

Consequence of Non- Payment to MSME

Where buy fail to make payment within agreed period of time, the buyer will be liable to pay compounded interest on monthly basis to the supplier on the amount outstanding, immediately following the date agreed upon or appointed date, at the rate three time of the rate notified by the Reserve Bank of India.

Remedies in Dispute

Any dispute between buy and supplier, with regard to any amount due, may make an application to the Micro and Small Enterprises Facilitation Council to resolve the issues or arbitration thereof. Every application made under this section shall be decided within a period of 90 days from the date of making such an application.

Composition of Micro and Small Enterprises Facilitation Council

Every State shall constitute Micro and Small Enterprises Facilitation Council which consist of not less hen 3 members but mot more than 5 members.

Appeal buy buyer

Any decree, award or other order made by the Council shall not be appealed in the Court unless 75% of the outstanding amount payable to supplier to be deposited by the Buyer in the Court.

Provided that such 75% amount will be paid to the supplier as it considers reasonable under the circumstances of the case.

Conclusion

The purpose behind such enactment is still not fulfilled as the journey of this Act is so long. But in recent past years, the Government has tried to implement effectively and the required compliances become compulsory along with disclosure of default in the Financial Statement which indicates good endeavors toward effective implementation consequently the benefits of the Act are reaching to the actual enterprises.

Further, it is recommended to get a registration and get the numerous benefits offered by this Act.

Declaimer: The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available in this article are for general informational purposes only.