India's MSME Law Changes Are Live: What Buyers Must Check

Key parts of India's amended MSME law came into force on 15 October 2026. If your business buys from micro or small suppliers in India, the penalties for getting your disclosures wrong are now higher. Here is what has changed, what has not, and what to check before your next quarter-end.

What came into force on 15 October

The Ministry of MSME issued notification S.O. 5575(E) on 12 October 2026. It brings most of the Micro, Small and Medium Enterprises Development (Amendment) Act, 2026 (Act No. 16 of 2026) into force from 15 October.

One more section, on how the Facilitation Councils are made up, starts on 15 December 2026. The three sections on mediation, arbitration and challenges to awards have no start date yet, according to TaxGuru's summary of the notification.

The main changes now in force:

• Tiered penalties for buyers. A buyer who breaches the Section 22 disclosure rule gets a warning the first time. A second breach can cost up to ₹50,000, and a third or later breach between ₹50,000 and ₹1 lakh, as SCC Online sets out. Minimum penalties rise by 10% every three years, and the Development Commissioner now decides them.
• TReDS for central public sector companies. Central Public Sector Enterprises must settle MSME invoices through RBI-authorised TReDS platforms, which are online invoice-discounting exchanges. The government can extend this to other bodies by notification.
• Voluntary, digital registration. Filing an MSME registration memorandum becomes voluntary for all enterprises, on a national digital platform still to be notified, as Vinod Kothari explains. Wilfully giving false information can attract a penalty of ₹1,000 to ₹50,000 after a first warning.
• A new classification basis. Enterprises will be classified on investment and turnover together, but the actual limits will come later by notification.

What has not changed

The core payment rules stay the same. Under Section 15, you must pay a micro or small supplier by the date agreed in writing, and that date cannot be more than 45 days after you accept the goods or services.

Pay late and Section 16 charges compound interest, with monthly rests, at three times the bank rate notified by the RBI. That applies whatever your contract says, as this TaxGuru guide explains.

Section 22 also stays. If your accounts are audited, you must disclose the principal and interest still unpaid to these suppliers at year-end, the interest paid during the year, and the interest that remains due. What is new is the sharper penalty for getting this wrong.

When the dispute sections do start, mediation will have to be completed within 90 days of the date fixed for the first appearance, and arbitral awards made within 90 days of the end of pleadings.

What this means for your business

For Indian companies, MSME disclosures are now a live compliance risk, not a footnote in the accounts. Auditors may well ask harder questions, and repeat breaches now carry real fines.

For GCC groups with Indian subsidiaries, these rules sit with the Indian company, even when payments are approved from head office. If finance in Doha, Dubai or Riyadh runs the group payment cycle, make sure it respects the 45-day limit for Indian micro and small suppliers.

For example, a Bengaluru subsidiary of a Doha trading group buys packaging from three small Indian suppliers on 60-day terms. Those terms already break the 45-day cap. Interest builds up whether or not the suppliers ask for it, and it has to appear in the year-end disclosure.

For Indian MSMEs that sell to central public sector companies, it is worth getting onto a TReDS platform now if you are not already registered.

Your checklist for this month

• Tag every Indian supplier in your vendor master as micro, small, medium or other, using their registration details where they have them.
• Run an ageing of payables to micro and small suppliers and flag anything over 45 days from acceptance.
• Review contracts and purchase orders. Any credit period above 45 days for these suppliers needs fixing.
• Work out the interest on late payments and accrue it. Do not wait for the supplier to claim it.
• Prepare the Section 22 disclosure schedule now, rather than at audit time.
• If you supply central public sector companies, register on a TReDS platform.
• Watch for notifications on classification limits, the national registration platform and the start date of the dispute sections.

These are general points, so check with your adviser on how the changes apply to your business. A weekly payables ageing that flags micro and small suppliers nearing day 45 is the kind of routine NexCFO AI's accounts payable tools can run for you.

Pay small suppliers on time and record it properly: the law always required it, and now forgetting costs more.