Delayed Payments Choke MSMEs as Dues Cross Rs 50,000 Crore Despite Govt Push

Complaints by micro and small enterprises (MSEs) over delayed payments from buyers have crossed Rs 50,000 crore, highlighting persistent liquidity stress in the sector. Official data shows that since October 2017, MSEs have filed 2.44 lakh applications to recover dues worth Rs 52,705 crore from companies that procured their goods and services but failed to pay on time.

This marks a 25 per cent rise from around Rs 41,900 crore pending as of March last year, despite ongoing efforts by the government to improve payment timelines.

Data from the MSME Ministry’s Samadhaan portal, which was launched in October 2017 to monitor delayed payments, reveals a relatively low resolution rate. Out of the total complaints, only 49,068 cases involving Rs 7,893 crore have been disposed of by the respective facilitation councils.

Also read: MSME Credit Touches Rs 83 Lakh Crore in FY25 Amid Asset Quality Gains: Report

These councils, set up by state governments under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, are tasked with resolving disputes through arbitration or conciliation. However, another 58,236 applications involving Rs 9,097 crore remain pending with them, indicating significant delays in enforcement. Under the MSMED Act, buyers are required to settle payments within 45 days.

Meanwhile, the number of applications settled mutually between buyers and sellers has risen to 22,892, involving dues of Rs 2,827 crore. On the other hand, rejections by councils have also increased, now standing at 69,042 cases worth Rs 13,560 crore, up from 46,438 applications involving Rs 9,218 crore that were dismissed till May last year.

Delayed payments continue to pose a serious challenge to MSEs, many of which operate without steady access to formal credit. Payment delays impact their ability to manage day-to-day operations, ranging from paying salaries and purchasing raw materials to servicing loans, and restrict their capacity to innovate or scale.

Also read: Udyam Milestone: Over 6.5 Crore MSMEs Now Registered Across India

To improve payment discipline, the government last year introduced clause (h) under Section 43B of the Income Tax Act. It disallows buyers from claiming expenses on MSE invoices unless payments are made within 45 days (if an agreement exists) or 15 days (if there is none).

Separately, since January 2019, companies are also required to file the MSME-1 return form on a half-yearly basis, detailing unpaid dues exceeding 45 days. Non-compliance can attract a penalty of Rs 20,000 for the company and each responsible officer, with subsequent failures drawing a fine of Rs 1,000 per day, capped at Rs 3 lakh.