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In my opinion, the major problem that affects the MSME is the collection aspect of the Invoice made for Service or Supply or Service & Supply. Timely realization of the trade receivables is the main cause of MSME units’ failures and losses.

Central Government’s initiative of 'samadhan.msme.gov.in' is a good initiative but it does not serve the intended purpose / expectations.

Details collected from the portal as on 30.06.2021 at 11.58 hours.

National MSME Bills Payment (Factoring) Portal (NMBPP)

Exhibit on Number of Cases Involved

At 11.58 hrs. taken from the portal

No. of Cases

% Age

Settled

unsettled

Rejection

Applications filed by MSEs

80,555

100%

18.2%

63.2%

18.6%

Applications Mutually Settled

7,265

9%

     

Applications yet to be viewed by MSEFC Council

30,721

38%

     

Applications Rejected by MSEFC Council

14,962

19%

     

Cases Disposed by MSEFC Council

7,398

9%

     

Cases Currently under Consideration by MSEFC

20,209

25%

     
 

Exhibit on the Amount Involved (In Crores) - Compiled Version.

At 11.58 hrs. taken from the portal

 No. of Cases

Amount Payable

Settled Amount

% age

Central Government, its departments & PSUs'

7,437

4,425

366

8.3%

State Government, its departments & PSUs'

8,354

5,630

167

3.0%

MSME Units

6,342

946

72

7.6%

Individuals & Proprietors’

18,158

1,875

96

5.1%

Others

40,259

9,029

621

6.9%

Total

80,550

21,905

1,322

6.0%

The above exhibits show only the cases where the aggrieved have lodged their grievances. The settlement procedure is not commensurate with the expectations.

I suggest the Central Government may initiate an Authority for National MSME Bills Payment (Factoring) Authority (NMBP) for quick processing of MSME bills under statute.

Scheme

  • National MSME Bills Payment (Factoring) Authority (NMBPA)
  • Launching a Payment Portal
  • Stake Holders - Seller / Buyer
  • Goods / Services
  • Intermediaries = Nominated Bankers
  • Intermediaries = Insurance companies

Modality

  • MSMEs’ registered / to be registered under 'Udyam' are eligible.
  • Individual Accounts will be opened for the MSME entities
  • Income tax PAN Number will be allotted as account numbers
  • Suppliers / Sellers (Goods & Service) will be asked to 'Log in' to their account and give the following particulars
  1. Name of the Entity
  2. Address for Communication
  3. IT PAN
  4. GST No.
  5. Mobile Number linked to Bank Account
  6. E-mail address
  7. Latest IT acknowledgement
  8. Name of the Bank
  9. Name of the Branch
  10. Account Number
  11. Type of Account
  12. IFSC code
  • Fields to be entered while uploading the Invoice / bills
  1. Name of the entity - buyer / Receiver of Services
  2. Address for Communication
  • IT PAN
  1. GST No.
  2. E-mail address
  3. Invoice No.
  • HSN Code if any
  • Material / Service Description
  1. Invoice Basic Value
  2. IGST / CGST / SGST separately
  3. Other Addons to the bill
  • Type of Payment - Advance / Partial / Full Value
  • Due date of Payment as per Contract / agreement
  • Attachment of Invoices in PDF format

Processing Methodology

- On receiving the Invoice in the portal from the Seller / Service Provider, the auto forwarding system will be activated and the details pertaining to the Invoice and a Covering letter with Seller’s details and Invoice details will be posted to the concerned Buyer of goods / Receiver of the Services with a unique id generated for identifying the details.

IF

a. The Buyer is also having an account in the NMBPA Portal, then it will be an internal posting

IF

b. The Buyer is not having an account in the NMBPA portal, then it will be directed to the designated mail with

  1. Details of the Invoice with supplier details in a pre-designed template
  2. Due date of Payment
  3. Payment mode to the NMBPA Portal details like, Name of the Bank, Branch, Account Number and IFSC details

- Buyer / Service Receiver will make the payment direct to the NMBPP after deductions for shortage / service deficiency if any. Buyer’s Payment template will be pre-defined for making easy online payment / Payment through Bank / Credit card etc. Separate field for deductions details with Amount and remarks.

- Pre-defined template for giving break-up details for the paid amount and deductions with space for Remarks

- Seller on uploading the Invoice in the portal, he will be receiving the payment within 72 hours of posting.

 

Methodology for giving Credit

  1. 25% of the Turnover value declared in the Income tax Return will be the maximum Credit limit
  2. Through Bank Guarantee, the Credit limit can be increased over and above 25%
  3. Upper credit celling can be fixed by the Government
  4. 85% of the Basic Invoice Value + Addons + 100% of taxes less deductions made for short supply / service deficiency.
  5. 5% of the Basic value of the Invoice / bill shall be paid upfront while uploading an invoice in the Portal.
  6. 15% Balance will be paid after the Buyer / Service receiver makes the payment or 60 days whichever is earlier

In the case of Seller becomes the buyer the procedure followed will be vice versa.

Major Benefits:

  1. When the portal handles cases with the turn-over of - say 1,00,000 lakh crores, the upfront processing charges collection will be around 500 crores which may increase over a period and will act as a Cushion for Non-Receivables where court’s intervention may take place.
  2. Suitable provisions in the form of enactment will help the authority to realise the dues.
  3. Authority can take an Insurance cover for the losses and other incidental expenses.
  4. MSMEs’ after uploading the Invoice will get the 'Factoring' like benefit and the Authority will be having the sole right for collection.
  5. There will be no recourse to the MSMEs’
  6. The indemnity will not be available for MSMEs’ in cases of fraud, misfeasance etc.,
  7. Cumbersome bank loan / fund limits avoided
  8. MSMEs’ working cycle and production will have phenomenal increase.
  9. Phenomenal increase in GDP and Philip to MSMEs’ growth.
  10. Saving lot of MSMEs’ from Interest burden, agony
  11. Many more.

Note: If the seller's Invoice is rejected totally for payment due to technical reasons, the Seller should make good the 85% payment released with in 60 days failing which his membership shall be removed from the portal.

To conclude at some stage it will become a national portal for all commercial payments


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Category Corporate Law, Other Articles by - N.Srinivasan 



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