The amendments to the MSMED Act seek to strengthen the legal framework governing MSMEs, promote a more enabling business environment, improve institutional mechanisms and address delayed payment issues faced by Micro and Small Enterprises.
A major provision of the amendment is to give permanence to the Udyam Registration Portal as a digital, free and voluntary registration platform for MSMEs. The amended framework also incorporates investment in plant and machinery and turnover as the twin criteria for MSME classification.
The amendment introduces Online Dispute Resolution (ODR) to facilitate faster and cost-effective settlement of disputes related to delayed payments. Specific timelines have also been prescribed for mediation and arbitration proceedings.
To strengthen recovery of dues, mediated settlement agreements and arbitral awards under Section 18 can be recovered as arrears of land revenue through the District Collector, Deputy Commissioner or other notified authority in the jurisdiction where the buyer's assets are located.
The amendment also provides for faster payments to MSMEs by requiring Central Public Sector Enterprises (CPSEs) to route invoice settlements for goods and services procured from MSMEs through the Trade Receivables Discounting System (TReDS).
In another significant reform, certain penal provisions have been decriminalised, with conviction-based penalties replaced by graded civil penalties in specified cases. The changes are intended to promote trust-based regulation and improve the ease of doing business for MSMEs.
The government has stated that the amendments will strengthen formalisation, support the scaling-up of MSMEs and contribute to inclusive, sustainable and employment-intensive economic growth, in line with the vision of Viksit Bharat @2047.
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