Legal Compliance for Payments to MSMEs

1. The Micro, Small, and Medium Enterprises Development Act, 2006:
- This Act mandates that all payments to MSMEs must be made within 45 days of the acceptance of goods or services.
- Failure to do so requires the buyer to pay compound interest with the monthly rest rates to the supplier.

2. Trade Receivables Discounting System (TReDS):
- TReDS is an online platform that facilitates the financing of trade receivables of MSMEs.
- It allows MSMEs to auction their trade receivables to multiple financiers, ensuring quicker access to funds.

3. Public Procurement Policy for MSEs Order, 2012:
- This policy mandates that all central ministries, departments, and public sector undertakings procure at least 25% of their annual purchases from MSMEs.
- It also requires that payments to MSMEs for goods and services be made within 30 days.

4. Credit Guarantee Fund Scheme for MSMEs:
- This scheme provides collateral-free credit to MSMEs to meet their working capital requirements.
- The scheme helps in improving the flow of credit to MSMEs, ensuring timely payments to suppliers.
By adhering to these legal compliances set up by the government, payments to MSMEs can be streamlined, ensuring their financial stability and growth.