This Bill overhauls the Micro, Small and Medium Enterprises Development Act, 2006, the law that defines what counts as an MSME and gives small suppliers legal protection against delayed payment. Two problems have dogged the original Act: the investment and turnover thresholds are written into the statute and so need an amendment every time they go stale, and the delayed payment machinery is slow.
On classification, the Bill hands the government power to fix the criteria by notification, based on investment in plant, machinery or equipment and on turnover, instead of freezing numbers in the Act. Registration on the digital Udyam style platform becomes voluntary for all categories rather than mandatory, which reduces paperwork for very small firms.
The payments provisions are the ones that will bite. Central public sector enterprises must route MSME invoices through the Trade Receivables Discounting System, so that a small supplier can discount an approved invoice and get cash rather than waiting on a buyer. Dispute resolution gets hard deadlines: mediation must conclude within ninety days, and an arbitral award must follow within ninety days of pleadings closing.
Finally, several offences are decriminalised. Failures around registration and reporting of unpaid dues now attract graduated monetary penalties that step up by ten percent every three years instead of criminal consequences.