MSME Amendment Bill 2026: How the proposed changes could benefit small businesses

“The business environment has changed significantly, and so have digital transactions. The needs of industries have also changed. It has therefore become essential to amend this law in line with the changing times,” he mentioned.

The Minister further added that the “primary objective of the amendment is to ensure timely payments of Micro Small and Medium Enterprises (MSMEs), introduce stricter measures against delayed payments and improve ease of doing business.”

TReDS settlement proposal for CPSEs and digital MSME registration  

A key proposal in the Bill makes it mandatory for Central Public Sector Enterprises (CPSEs) to route settlement of invoices for procurement from MSMEs through the Trade Receivables Discounting System (TReDS). The electronic platform is authorised by the Reserve Bank of India.

The Centre may extend this requirement to other authorities and entities through notification, while state governments may notify similar provisions for state PSUs.

The proposed bill also provides for a national digital platform for free and voluntary MSME registration. States may create their own registration platforms and enterprises registered on the national portal may also get benefits under applicable state government schemes.

It further empowers the Central Government to classify enterprises as micro, small or medium based on investment in plant and machinery or equipment and turnover. It also excludes expenditure on pollution-control equipment, industrial safety devices, pollution control equipment and other notified items from investment calculations.

Faster dispute resolution and recovery

The proposed amendments set timelines for resolving payment disputes. Mediation should be completed within 90 days from the first appearance before the Micro and Small Enterprises Facilitation Council or a mediation service provider. If, in a case, mediation fails, arbitration proceedings must start within 30 days and arbitral awards must be issued within 90 days after completion of pleadings.

The Bill may also enable online mediation and arbitration through audio-video and other electronic media. Mediated settlements and arbitral awards may be recovered as arrears of land revenue through the District Collector, Deputy Commissioner or another authority notified by the State Government. Such awards will constitute a legally enforceable debt under the Insolvency and Bankruptcy Code.

A buyer challenging an award or mediated settlement must continue to submit 75% of the awarded amount before a court entertains the application. If the challenge remains pending for more than six months, the court could potentially direct payment of at least 50% of the deposited amount to the supplier.

More facilitation councils and stricter compliance

The Bill requires state governments to establish an adequate number of Micro and Small Enterprises Facilitation Councils. It also needs to provide the infrastructure and digital systems and manpower required for timely disposal of disputes.

It also mandates disclosure of details of MSME invoices routed and settled through TReDS by CPSEs and other notified entities. A penalty framework has been proposed for furnishing false registration information and violating reporting requirements. Under the proposed law, buyers who reportedly fail to comply with the disclosure requirements under Section 22 may face a fine ranging from Rs 50,000 to Rs 1 lakh.

The Bill also proposes appointing the Deputy Commissioner as the adjudicating officer for imposing penalties, with appeals to be filed before the Secretary of the concerned Central Government ministry within 30 days.