Empowering MSMEs: Understanding Your Rights & Responsibilities

Empowering MSMEs: Understanding Your Rights & Responsibilities

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The government has taken steps to support Micro, Small, and Medium Enterprises (MSMEs) through timely payments, underpinned by the MSME Act of 2006. If you’re an MSME or engage with one as a buyer, it’s crucial to understand the protections and obligations in place.

For MSMEs: Know Your Rights
As an MSME-registered entity, you have the right to receive payments within 45 days. In cases of delay, you’re entitled to an interest penalty three times the RBI’s bank rate, which currently stands at 6.50%, translating to an interest claim of 19.50%.

Key Actions for MSMEs:

Invoice Details:
Ensure your MSME registration number is on the tax invoice to affirm your status.

Communicate Your Status:
Proactively inform your customers of your MSME registration.

Document Transactions:
Secure a Purchase Order (PO) and Proof of Delivery (POD) for every transaction, including services, to validate the contract’s terms and completion. PODs can be acknowledged via email or direct sign-off by the client.

For Buyers from MSMEs: Responsibilities

Vendor Tagging:
Identify your vendor as an MSME upon their onboarding.

Addressing Defects:
In case of any service gaps or product defects post-invoice, document these concerns through email and ensure acknowledgment.

Legal Obligations:
– Compliance Filings:
Submit the MSME form to the Ministry of Corporate Affairs (MCA) biannually.
-Financial Disclosures:
Reflect dues to MSME vendors in your annual Balance Sheet.
-Tax Considerations:
Non-payment to MSME vendors within the financial year disqualifies the expense for income tax deductions, which can be reclaimed in the year of payment 

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