MSME law changes from 15 October: what suppliers and buyers should do
Parliament amended the MSME Development Act in August. A notification dated 12 October 2026 brought most of the changes into force from 15 October. Here is what that means for small manufacturers and the firms that buy from them.
· 3 min read · For owners and accounts heads of small manufacturers, and firms that buy from them
If you run a small factory, late payment is probably your biggest worry after orders. The law meant to protect you, the MSME Development Act of 2006, has now been changed. Parliament passed the amendment in August 2026. On 12 October 2026 the MSME Ministry notified that most of the new sections apply from 15 October.
What applies from 15 October
- Payments from central PSUs through TReDS. Every Central Public Sector Enterprise must now settle MSME invoices through a TReDS platform authorised by the RBI. TReDS is an online system where your invoice to a large buyer can be discounted, so you get paid early by a financier. States can ask their own PSUs to do the same.
- Udyam is now in the law. The free, voluntary online registration platform now has a legal basis. MSMEs are classified by both investment in plant and machinery and turnover.
- Graded penalties instead of criminal cases. Giving false details in your registration now brings a warning first, then a penalty of ₹1,000 to ₹50,000. A buyer who does not show unpaid MSE dues and interest in its annual accounts gets a warning first, then a penalty of ₹10,000 to ₹50,000, then a fine of ₹50,000 to ₹1 lakh.
- More Facilitation Councils. States must set up enough Micro and Small Enterprises Facilitation Councils to hear payment disputes. The new rules on who sits on these councils start on 15 December 2026.
What is not in force yet
The Act also sets 90-day limits for mediation and for arbitration awards, recovery of awards as arrears of land revenue, and a 75% deposit before a buyer can challenge an award. These sit in sections that the 12 October notification does not list. Treat them as coming, not as current, and ask your auditor to confirm against the Gazette copy.
What to do this week
- If you supply to central PSUs: register on an RBI-authorised TReDS platform if you have not already. Ask your PSU buyer how its invoices will now be routed.
- Check your Udyam details. Make sure turnover, investment, address and activity match your books.
- If you buy from micro and small firms: list every unpaid MSE invoice with its due date. This list is what your annual accounts must disclose.
- Keep your proof ready. Purchase orders, delivery challans, invoices and follow-up messages, kept in one place. When the dispute timelines start, a clean file will move faster.
How we can help
Most of this depends on knowing, on any day, which invoices are due, who owes what and since when. Kanakku matches payments to invoices and keeps a clear list of what is pending, for both what you are owed and what you owe. If you want to see how your own receivables would look in it, talk to us.
