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The Central Government vide notification number S.O.5622 (E), dated the 2nd November, 2018 has directed that all companies, who get supplies of goods or services from micro and small enterprises and whose payments to micro and small enterprise suppliers exceed 45 days from the date of acceptance of the goods or services, shall submit a half yearly return to the Ministry of Corporate Affairs stating the following:

(a) The amount of payment due; and
(b) The reasons of the delay;

Specified Company means Every Company 'Public or Private' who Received Goods or Services ‘from’ Micro or Small Enterprises ‘of which’ Payment Due or Not Paid till 45 days

That is, Every Public Limited Company or Private Limited Company which has received goods or services from Micro & Small Enterprise, Payment of which is due or not paid to such enterprise for 46 days from date of acceptance shall provide requisite details to Ministry of Corporate affairs in prescribed form within specified due date.

Advantages and Disadvantages

This move of the government has delighted Micro and Small scale enterprises that operates with limited resources and are hard hit by delay in receiving payments from the companies. Not able to survive the financial crunch and long legal procedures at certain times results in closure of these micro and small enterprises.

The interference of government in this matter by taking action against willful defaulters would provide a new life line to this sector and encourage them to venture into new business avenues.

Though this move of the government has brought a movement to cheer for MSME sector which is the largest employment generator in India, there are certain concerns related to it.

While this enhance the financial cycle and provide moral boost to micro and small enterprises, there are concerns that the companies in order to avoid tedious compliance or legal procedure might opt not to procure goods and services form this enterprises, which would result in business stagnation or might lead to closure.

Nevertheless, The Interim Union Budget 2019 has also proposed sourcing of requirement to the extent of 25% from MSME for government enterprises, few other such regulation and extending the mandatory procurement criteria to public and private limited companies might keep a long lasting smile on the face of these micro and small entrepreneurs.

Disclaimer: The views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author's organisation, committee or other group or individual. Whilst due care has been taken in compiling this note, expert advice and user discretion is recommended prior to application of the contents.

The author can also be reached at caidrismk@gmail.com

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