Updated 13 November 2026. A plain-language summary for business owners, not legal advice. Read the Act and notifications, or ask your CA or lawyer, before you change contracts or processes.
Short answer: The Micro, Small and Medium Enterprises Development (Amendment) Act, 2026 (Act No. 16 of 2026) is coming into force in stages. Most of it started on 15 October 2026: free and voluntary registration on a national digital platform, a new classification framework based on investment and turnover, a rule that Central Public Sector Enterprises (CPSEs) settle MSME invoices through TReDS, new disclosure duties and a revised penalty system. The new make-up of the MSE Facilitation Councils starts on 15 December 2026. The changes to mediation, arbitration and enforcement of awards (Sections 8 to 10 of the amending Act) have no start date yet.
The commencement notification
The Ministry of MSME notified the dates through S.O. 5575(E) dated 12 October 2026. The section-wise split is summarised by TaxGuru, and a broader explainer of the Act is on Corpseed. Official texts are published in the e-Gazette.
| Date | Sections of the amending Act | Subject |
|---|---|---|
| 15 October 2026 | 2 to 7, 11, 13 to 17 | Definitions, Board, classification, registration, interest provision, TReDS, more Councils, reporting, penalties, rules, savings |
| 15 December 2026 | 12 | Composition of Facilitation Councils |
| Not yet notified | 8 to 10 | Mediation and arbitration timelines, enforcement, setting aside awards |
What is already in force (from 15 October 2026)
1. Free, voluntary registration on a national digital platform
Section 8 of the 2006 Act is replaced. Filing a memorandum is free and voluntary, on a national digital platform the government notifies. States can notify their own platforms for state benefits. Registration still matters in practice: government schemes, priority lending and the protection on delayed payments all depend on proving you are a micro or small enterprise, and the registered address decides which Facilitation Council hears your case.
2. Classification by investment and turnover
The amended Section 7 lets the Central Government classify enterprises using both investment in plant and machinery or equipment and turnover. The Act itself does not put rupee limits in the text. Limits come by notification, so check the current notification rather than relying on figures quoted in older articles.
3. TReDS for CPSE purchases
A new Section 15A requires CPSEs to route settlement of MSME procurement invoices through an RBI-authorised Trade Receivables Discounting System (TReDS) platform, in a manner still to be prescribed. Other government bodies are covered only if notified. A new Section 22A requires these buyers to disclose the MSME invoices routed and settled through TReDS.
If you supply to a CPSE, expect to be asked to register on a TReDS platform and to upload or accept invoices there. A practical guide to onboarding is on InCorpX.
4. Penalties with warnings first
Penalties move to a graded system with an adjudicating officer and an appeal route. According to Corpseed's reading of the Act:
- False information in the registration memorandum: a warning first, then a penalty of ₹1,000 to ₹50,000.
- Buyers who do not disclose MSME dues in their annual accounts (Section 22): a warning first, then ₹10,000 to ₹50,000 for the second instance, and ₹50,000 to ₹1 lakh for later instances.
- Minimum penalties can rise by 10% every three years, if the government notifies it.
What starts on 15 December 2026
Section 12 of the amending Act replaces Section 21 of the 2006 Act. Each Micro and Small Enterprises Facilitation Council (MSEFC) will have three to five members, with a Chairperson not below the rank of Joint Director, representation from MSE associations and at least one legal member. Section 11, already in force, lets states set up additional Councils. The aim is to clear the backlog of delayed-payment cases.
What has not started yet
The Act sets time limits for disputes: 90 days for mediation, then arbitration, with an award due within 90 days of pleadings being completed, and a buyer who challenges an award must first deposit 75% of the amount. These provisions sit in Sections 8 to 10 of the amending Act, which have not been notified. Until they are, existing procedure continues. Watch for a further notification.
What did not change: the 45-day rule
Nothing in the commenced sections changes the basic rule in Section 15 of the 2006 Act: a buyer must pay a micro or small supplier by the agreed date, and the agreed period cannot exceed 45 days (15 days if there is no written agreement). Late payment still carries compound interest at three times the RBI bank rate. For income-tax treatment of late payments, see Busy's explainer and confirm with your CA under the Income-tax Act, 2025.
Checklist for MSME suppliers
- Check your registration and keep your address, activity and turnover details correct. Wrong details can now attract a penalty after a warning.
- Print your registration number on invoices and mention the 45-day payment term in quotes and purchase orders.
- Register on a TReDS platform if you sell to CPSEs or large corporates.
- Track overdue invoices by age (0 to 15, 16 to 45, over 45 days) so you can follow up or approach the Council with records ready.
Checklist for buyers
- Flag MSME vendors in your vendor master with their registration number and category.
- Set payment terms to 45 days or less for micro and small suppliers, and alert finance before the due date.
- Prepare the annual disclosure of unpaid principal and interest owed to micro and small suppliers, since repeat failures now carry fines.
- CPSEs and notified bodies: plan TReDS integration and the Section 22A reporting once the format is prescribed.
How software helps
Most of this is easier with clean data: a vendor master with MSME status, invoice ageing reports, due-date alerts and a ready report for the annual disclosure. If you use a GST billing system or an ERP, check that it can store MSME category against each vendor and report dues past 45 days. Our November 2026 compliance calendar lists other deadlines this month.
Need help?
Nextinera builds billing, purchase and ERP systems for Indian businesses, with vendor ageing, payment alerts and compliance reports built in. Book a free call to talk about your setup.