The Small and Medium Enterprises Development Bill 2005 which was enacted in June 2006 was renamed as “Micro, Small & Medium Enterprises Development Act, 2006” aims at facilitating the promotion and development of small and medium enterprises.
All classes of enterprises, whether Proprietorship, Hindu undivided family, Association of persons, Cooperative society, Partnership firm, Company or Undertaking, by whatever name
called can apply for the registration and get qualified for the benefits provided under the Act.
BENEFITS OF REGISTERING MSME UNDER MSME ACT 2006
a. If a micro or small enterprise has filed a memorandum with DIC of its area, then it stands
to gain as to timely payment in respect of supply of goods or rendering of services to any
b. With the enactment of MSMED Act, 2006, the Interest on delayed payments to small scale
and ancillary industrial undertakings act, 1993 is repealed w.e.f. 2nd October, 2006.
c. Any Buyer who purchased any goods or availed any services from Micro or Small
enterprises which has filed a memorandum with the authority, then the buyer shall make the
payment on or before the date agreed upon between him and the supplier in writing or within
a period of 15 days from the day the goods are delivered or services are rendered. However
the period of credit can not exceed more than 45 days from the date of delivering product or
Other Benefits of Registration
1. Eligible for availing exemption under
• Excise Scheme
• Direct Tax Laws.
2. Credit prescription (Priority sector lending), differential rates of interest etc.
3. Statutory support such as condition and the Interest on Delayed Payments Act.
CONSEQUENCE OF NON - REGISTRATION
Since filing is optional, no penalty is attracted. However, filing the memorandum is prerequisite
to qualify as a ‘supplier’ for Chapter V purposes and non-filing will make the supplier
ineligible to benefits under Chapter V relating to right to receive timely payment and right to
receive interest under Sec 16 for delayed payment.
According to Sec 28(1), whoever intentionally contravenes or attempts to contravene or
abets the contravention of any of the provisions contained in sub-section (1) of Sec8 shall
a) First conviction: Fine < 1000
b) Second or subsequent conviction: 1000 < Fine >10,000
OBLIGATION FOR BUYERS INCASE OF ENTERING INTO CONTRACT WITH REGISTERED
1. The Buyers have to confirm the registration of the suppliers under the MSMED Act, 2006
2. Date of Credit Period:
• Date as agreed between the Supplier and Buyer as per agreement.
• 45 days from the date of Delivery/ deemed date of Delivery, whichever is earlier
Note: 15 days from the date of acceptance or the day of deemed acceptance of any goods
or services from a supplier would be treated as the credit period if nothing is agreed between
the Buyer and Supplier.
MICRO AND SMALL ENTERPRISES FACILITATION COUNCIL (MSEFC)
Application to Micro and Small Enterprises Facilitation Council (MSEFC) can be made in case
of dispute for starting the arbitration process. Once the application is done under MSEFC,
there is no provision to withdraw the proceedings.
CLASSIFICATION OF MSME
Classification of the Micro and Small Enterprises (manufacturing and service) shall be under
Priority Sector which includes Small Road and Water Transport Operator, Small Business,
Professional and Selfemployed Persons and all other service enterprises. Retail Trade will not
be classified under Micro and Small enterprises (service sector).
1. All loans granted to Small Enterprises including Micro Enterprises (both Manufacturing and
Services) will be classified under Direct Finance to Micro and Small Enterprises Sector.
2. All advances granted to units in the KVI sector, irrespective of Sector their size of
operation, location and amount of original investment in Plant and Machinery, will be eligible
for consideration under the Sub Target (60 percent) of the Small Enterprises segment within
the Priority Sector.
1. Credit to persons involved in assisting the decentralized sector in the supply of inputs to
and marketing of outputs of artisans, village and cottage industries.
Advances to cooperatives of producers in the decentralized sector viz., artisans, village and
2. Loans granted by banks to NBFCs for on lending to Small and Micro enterprises
3. Existing investments as on 31st March, 2007, made by banks in special bonds issued by
NABARD with the objective of financing exclusively non-farm sector may be classified as
Indirect fiancé to Small Enterprise sector till the date of maturity of such bonds of March 31,
2010, whichever is earlier. Investment in such special bonds made subsequent to March 31,
2007 will, however, not be eligible for such classification.