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Understand the rule of 45 days in MSME


Being Vakil, MSME, MSME Recovery
Being Vakil

Nowadays, chaos is going on with respect to the New #MSME Payment Rules. Hence, I am considering this as our first chapter to understand the real game of the MSME Sector.


What is MSME 45 days Rule?


In India, there's a rule known as the MSME 45-day payment rule. This rule applies to Micro and Small Enterprises (MSMEs). Basically, if you're a small business and you sell stuff or provide services to someone, they have to pay you within 45 days after you deliver the goods or services.


The idea behind this rule is to help out small businesses by making sure they get paid on time. See, small businesses often struggle with managing their money because sometimes their customers take forever to pay them. So, this rule is meant to make things easier for them by ensuring they get their money within a reasonable time frame.


Here's a simplified breakdown of the MSME 45 days payment rule:


1. When a supplier sells goods or services to a buyer, they need to agree in writing on when the payment will be made. But, this agreed-upon time can't be more than #45_days.


2. The 45-day countdown starts from the date the goods or services are delivered, according to the #MSMED Act.


3. If there's no specific agreement between the supplier and buyer about when the payment should be made, then the payment must be made before a certain date called the "appointed day." This "appointed day" is usually 15 days after the goods or services are delivered, as defined in the MSME Act.


Explanation of the MSME 45 days payment rule in different situations:


Here's a simpler explanation of the MSME 45 days payment rule in different situations for the year 2024:


1. No Agreement Between Supplier and Buyer:


If there's no specific agreement on when payments should be made, then the buyer must pay within 15 days from the date the goods or services were delivered. For example, if the delivery was on January 1, 2024, the payment should be made by January 15, 2024.


2. Agreed Period Longer Than 45 Days:


If the supplier and buyer agreed on a payment period longer than 45 days, then the payment must still be made within 45 days from the delivery date. For instance, if delivery was on January 1, 2024, and the agreed payment period is 60 days, the payment should still be made by February 15, 2024.


3. Agreed Period Between 15 and 45 Days:


If there's an agreement between the supplier and buyer for a payment period between 15 and 45 days, then the payment should be made within that agreed-upon period from the delivery date. For instance, if delivery was on January 1, 2024, and the agreed payment period is 30 days, the payment should be made by January 31, 2024.


What happens if payment is not made according to the MSME 45-day payment rule?


If the buyer doesn't make the payment within the specified period, as mentioned in Section 15 of the MSME Act, the supplier has the right to claim interest on the overdue amount. This interest is quite significant, set at three times the bank rate notified by the Reserve Bank of India.


It's important to note that this interest is compounded, meaning it keeps adding up at monthly intervals until the payment is made. So, the longer the payment is delayed, the more interest the buyer will owe to the supplier.


Want more clarity? please watch this video:



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