In the aftermath of lockdown and massive economic restrictions due to COVID-19 pandemic which paralysed the economies around the world, the Finance Minister announced several schemes to ameliorate the situation. The schemes and measures announced by the government may be accessed here. The Government announced packages to lend support to various sectors of the economy, with special focus on the MSMEs.
In order to extend the benefits arising out of the said schemes/COVID relief package to a broad section of affected persons, the Central Government has expanded the definition of MSMEs under the MSMED Act by Notification dt 01.06.2020. The said notification is to come into effect from 01.07.2020.
Definition of MSME: SCOPE EXPANDED
Section 2 and 7 of the MSMED Act, 2006 lay down the scope and definition of MSMEs. The table below shows the pre-notification and post-notification changes:-
Apart from the fiscal benefits announced in the relief package, these enterprises would also be able to avail the legal remedies available to MSMEs under Section 15 to 19 of MSMED Act.
As per section 15 of the Act, the preliminary liability of the buyer is to make all payments before the agreed time or if in absence of such agreement, the MSME is entitled to receive payments, 45 days from the date of acceptance of goods or services.
On failure to comply, the buyer is liable to pay a compound interest on three times the RBI bank rate for any goods and services supplied, as per S. 16 of the Act.
This secures a time limit on the payments to be made to the MSME. On failure of such payment, a reference can be made to the MSEFC which has a statutory duty to decide the same within 90 days from the date of making of the reference.
June 8, 2020 | By Mayank Aggarwal (with research inputs from Ms. Nancy Goel)