MSME Payments & Samadhaan
The 45-day rule, interest on delay, section 43B(h) and MSME Samadhaan.
Key facts
- A buyer must pay a micro or small supplier within the agreed period, which can't exceed 45 days from acceptance of goods or services. Without a written agreement, the limit is 15 days.
- On delay, the buyer owes compound interest with monthly rests at three times the RBI bank rate (MSMED Act section 16). This interest is not tax-deductible.
- Income tax: amounts owed to micro and small enterprises and unpaid beyond the 45-day limit at the year end are disallowed until actually paid (old section 43B(h)). It doesn't apply to medium enterprises or traders.
- A supplier can file a delayed payment case on the MSME Samadhaan portal; the Micro and Small Enterprises Facilitation Council (MSEFC) conciliates and then arbitrates.
- To challenge an MSEFC award in court, the buyer must first deposit 75% of the awarded amount.
- TReDS platforms let MSMEs discount invoices on large buyers; notified large buyers must be registered on TReDS.
- Companies report dues to micro and small enterprises beyond 45 days in Form MSME-1 every half year and disclose them in their financial statements.
Common questions
What is the 45-day rule for MSME payments?
If you buy from a micro or small enterprise registered on Udyam, you must pay within the agreed credit period, and never later than 45 days. With no written agreement, pay within 15 days. Late payment carries interest at 3× the RBI bank rate, compounded monthly.
Does 43B(h) apply to medium enterprises?
No. It applies only to micro and small enterprises (manufacturers and service providers). Medium enterprises and traders registered only for priority sector lending are outside it.
What is MSME Samadhaan?
The government portal where a micro or small supplier files a complaint for delayed payment. The case goes to the state's MSE Facilitation Council, which tries conciliation and then gives a binding arbitration award.
Is interest on delayed MSME payment deductible?
No. Interest paid under the MSMED Act for delayed payment is not allowed as a deduction for income tax.
How do I check if my supplier is micro or small?
Ask for their Udyam certificate and check the classification for the current year. Record the Udyam number and category in the supplier's ledger.