MSMED (Amendment) Bill, 2026
Key Amendments Passed by Parliament
The Bill aims to strengthen the MSME ecosystem through faster payments, digital registration, stronger dispute recovery, and ease of doing business.
KEY AMENDMENTS
[1] Statutory MSME Classification: Classification framework linked to both investment and turnover.
[2] Digital Registration Platform: Central Government to notify a national digital platform for free and voluntary MSME registration.
[3] TReDS for CPSE Procurement: CPSEs to route settlement of invoices for procurement from MSMEs through RBI-authorised TReDS platforms.
[4] Faster Mediation: Mediation to be completed within 90 days from the first appearance.
[5] Arbitration Timeline: If mediation fails, arbitration to commence within 30 days; award to be made within 90 days from completion of pleadings.
[6] Supplier-Friendly Jurisdiction: Proceedings may be taken where the registered MSME supplier is located.
[7] Stronger Recovery: Settlement/award recoverable as arrears of land revenue through the appropriate authority.
[8] Challenge Deposit Retained: Buyer challenging award/settlement continues to deposit 75% of the amount.
[9] Relief During Challenge: If challenge remains pending beyond 6 months, at least 50% of the awarded amount may be released to the supplier from the deposit.
[10] More MSEFCs & ODR: Adequate Facilitation Councils and online dispute resolution framework.
[11] Ease of Doing Business: Graded penalties and reduced criminal consequences for certain contraventions.
IMPORTANT TAX TAKEAWAY
The amendment does not dilute the payment discipline under Section 15 for Micro & Small Enterprises. Accordingly, the Section 43B(h) income-tax implications for delayed payments to Micro and Small Enterprises continue to remain relevant.
PRACTICAL IMPACT
Improves cash-flow visibility for MSMEs
Speeds up delayed-payment dispute resolution
Strengthens enforceability of MSEFC awards
Supports formalisation and compliance
Source: PIB release dated 07 August 2026 and MSMED (Amendment) Bill, 2026.
Effective dates will apply as notified by the Central Government.
Lok Sabha passed on 7 August 2026 | Rajya Sabha passed on 3 August 2026
Radhika Goyal is Author of Taxconcept Gurugram head office, for deeply reported tax, gst and income tax articles on issues that matter. He splits her time between New Delhi and Bengaluru, and has worked as a reporter, a podcaster and an editor for publications across India.