MSME Amendments 2026: New Payment and TReDS Rules

The MSME new rules affect the way Indian businesses handle MSME registration, invoice settlement, payment disputes and recovery. On 13 August 2026, the Micro, Small and Medium Enterprises Development (Amendment) Act was passed by the President.

But the changes in the rules do not take effect automatically. Each provision will come into force from the date notified by the Central Government.

What Is the Current Status of the MSME Amendments 2026?

The Amendment Act has become law, but businesses must check the commencement notification for each new provision.

What Are the Major MSME New Rules in 2026?

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The updates focus on registration, payment settlement and dispute resolution.

New Amendment Act provisions remain subject to commencement. Here is the Government overview

Key MSME Amendments and Existing Requirements in 2026

1. Mandatory TReDS Settlement

Operating Central Public Sector Enterprises must already route MSME procurement invoice settlements through an RBI-authorised TReDS platform.

• Covers purchases of goods and services from MSMEs.
• Invoice financing or discounting remains optional for suppliers.
• CPSEs must obtain annual statutory-auditor certification of compliance.

2. Faster Mediation and Arbitration

The amendments set separate deadlines for payment disputes involving eligible micro and small suppliers.

• Mediation: 90 days from the date fixed for first appearance.
• Arbitration referral: 30 days after unsuccessful mediation ends.
• Award: 90 days after completion of pleadings.

3. MSME Interim Payment Rule

The amended provision provides relief when a court challenge to an eligible award remains pending for more than six months.

• An applicant other than the supplier must deposit 75% before the court entertains the challenge.
• The court must order payment of at least 50% of the awarded amount, from the deposit, after the specified period.
• The rule does not apply merely because an invoice is overdue.

For a ₹40 lakh award, the minimum relief is ₹20 lakh, not half of the ₹30 lakh deposit. 

4. Stronger Recovery of MSME Dues

The amendments provide another recovery route for eligible settlements and awards under Section 18.

• Amounts may be recovered as arrears of land revenue.
• Recovery can involve the Collector, Deputy Commissioner or another notified authority.
• The authority must cover the location of the buyer’s assets.

5. Free Digital MSME Registration

The amendments strengthen the legal framework for free and voluntary digital registration. Free online registration already exists through Udyam.

• The Central Government will notify the national platform.
• States may notify their own platforms.
• Benefits remain subject to the relevant eligibility conditions.

6. Flexible MSME Classification

The Amendment Act allows investment and turnover limits to be specified through notification. It does not introduce new numerical limits.

• These limits apply from 1 April 2025.
• Both criteria must be met for the relevant category.
• Export turnover is excluded under the classification framework.

Read more: New MSME Turnover Limits

7. More MSE Facilitation Councils

States must establish an adequate number of Councils to handle payment disputes.

• Each Council will have three to five members.
• The Chairperson must be at least a Joint Director.
• Membership must include enterprise association representatives and a legal member.
• States may provide infrastructure, digital systems and staff.

8. Warnings and Graded Penalties

Specified information and disclosure defaults will attract warnings followed by monetary consequences.

• First instances generally attract a warning.
• Repeated false registration information or failure to supply required information can attract penalties.
• Repeated buyer failures to disclose unpaid MSE dues can attract a fine up to ₹1 lakh.

These are not blanket penalties for every late payment. 

9. Existing MSME Payment Period Continues

The amendments do not replace the payment deadlines for eligible micro and small suppliers.

• Without a written agreement: generally within 15 days of acceptance or deemed acceptance.
• With a written agreement: no more than 45 days.
• Delays attract compound interest with monthly rests at three times the RBI bank rate.

Businesses should record delivery, acceptance and written objections carefully. 

10. MSME Tax Deduction Rule: Section 37(2)(g), Formerly Section 43B(h)

For tax year 2026–27 onward, Section 37(2)(g) of the Income-tax Act, 2025 covers payments to eligible micro and small enterprises beyond MSMED Act deadlines.

• Such amounts are deductible in the year of actual payment.
• The income-tax return filing deadline does not extend the MSME payment limit.
• Section 43B(h) remains relevant to earlier years under transition provisions.

Munim users should keep supplier details and outstanding payment records updated for their tax review. 

Frequently Asked Questions

Have the MSME Amendments 2026 become law?

Yes. The Act received Presidential assent on 13 August 2026.

Is TReDS mandatory for every company?

No. The amended provision directly covers CPSEs. Any other central, state or private entity is covered only when notified by the appropriate government.

Does the interim payment rule apply to overdue invoices?

No. The rule is applicable once a challenge is made to an eligible award, decree, order or mediated settlement. 

Has the 45-day payment rule been removed?

No. If a written payment arrangement is made, it must not be for a period longer than 45 days from the date of acceptance. If there is no written agreement, then the appointed period of 15 days still applies.

Can an MSME claim interest on delayed payments?

Eligible micro/small enterprises can claim compound interest with monthly rests at three times the RBI bank rate. The claim must be backed by the transaction information provided by the supplier.