The MSME 45-day rule, explained simply

If you're an MSME supplier in India, and a buyer has been delaying your payment for 60 days with some version of "it's in process" — you already have legal leverage. You just don't know it yet. Or more likely, you know it exists and don't know how to use it without torching the relationship.

This article is about exactly that.

TL;DR

• Under MSME Act Section 15, a buyer must pay a registered MSME supplier within 45 days of accepting goods or services.
• If they don't, Section 16 entitles you to compound interest at 3× the RBI bank rate, calculated monthly.
• You don't need a lawyer to invoke the Act. A clearly-drafted demand notice citing Sections 15 and 16 changes the conversation by itself.
• The Samadhaan portal is the government's dispute resolution mechanism — online, low-cost, no lawyer required.

The situation every MSME knows

You shipped the goods. You sent the GST invoice. Payment terms said 30 days. Today is day 67.

You've called the procurement manager four times. First time they said "two weeks." Second time, "it's with finance." Third time, "approval pending." Fourth time they didn't return the call.

Your total outstanding is somewhere between ₹3 and ₹25 lakh. Not catastrophic enough to hire a lawyer — a lawyer will bill ₹30,000 just to open the file. Too large to ignore — that money is the working capital you need to pay for next month's raw materials.

You feel stuck. You shouldn't. You have rights that most buyers don't realise apply to them.

What the law actually says

Section 15 of the MSME Development Act 2006

"Where any supplier supplies any goods or renders any services to any buyer, the buyer shall make payment therefor on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day..."

— where "appointed day" is defined as the day immediately following the expiry of 15 days from the day of acceptance of goods or services.

Translation: the maximum legally enforceable payment window is 45 days from acceptance. Any contract that says otherwise is void under Section 15.

Section 16 — the teeth

If the buyer doesn't pay by the due date, they're liable for compound interest at three times the RBI-notified bank rate, calculated with monthly rests.

As of April 2026, the bank rate is 6.75%. Three times that is 20.25% per annum, compounded monthly. On a ₹5 lakh invoice that's 90 days overdue, that's roughly ₹25,400 in interest the buyer now owes in addition to the invoice.

Section 17 — it survives contract clauses

Even if you signed a contract saying "interest-free credit of 120 days", the MSME Act overrides it. Section 17 specifically says the Act applies "notwithstanding anything contained in any agreement between the supplier and the buyer."

What you need to qualify

Just one thing: your business must be registered as an MSME. If you have a Udyam Registration Certificate (URC), you're in. That's it. No other certification required.

If you don't have one yet, you can register for free in under 15 minutes at udyamregistration.gov.in. You'll need your Aadhaar and your PAN.

The buyer does not need to be an MSME. This protection works against any buyer — private companies, PSUs, central/state government departments, listed corporates. All of them.

How to actually use it without blowing up the relationship

The Act is a ladder, not a hammer. Most buyers pay the moment they realise they're legally exposed — you rarely have to go beyond the demand notice stage.

Here's the sequence that works:

1. Day 1–30 after the invoice is overdue — keep it warm. Polite WhatsApp, polite email. Reminders, not threats.
2. Day 31–44 — firm, not legal. "This invoice is now 35 days overdue — we're approaching the 45-day MSME Act trigger, could you share a payment date?"
3. Day 45 — the demand notice. One formal letter citing Sections 15 and 16 specifically. Worked example of the interest calculation included. A clear 7-day payment window before next step.
4. Day 52+ if still unpaid — Samadhaan. File a complaint on msefb.msme.gov.in. Online. Free to file. The MSEFC (Micro and Small Enterprise Facilitation Council) takes the buyer through mandatory conciliation and then arbitration. Enforceable as a civil court decree.

The interesting thing about this ladder: by tier 3, most payments come in. The demand notice is usually the last step MSMEs ever need to take. The buyer now understands the cost of delay isn't zero — it's 20.25% per annum, and it's theirs.

A worked example

This is illustrative — not a specific customer.

• Invoice amount: ₹8,50,000
• Due date: 20 January 2026
• Current date: 20 April 2026 (90 days overdue)
• Bank rate: 6.75%, so MSME Act rate = 20.25% per annum compounded monthly

Interest owed (compounded monthly):

• Month 1 interest (day 1–30): ₹8,50,000 × 20.25%/12 = ₹14,344
• Month 2: (₹8,50,000 + ₹14,344) × 20.25%/12 = ₹14,586
• Month 3: (₹8,64,344 + ₹14,586) × 20.25%/12 = ₹14,832

Total owed today: ₹8,93,762 (invoice ₹8,50,000 + interest ₹43,762)

If the buyer pays today, they save ₹14,832 versus waiting another month. That framing alone — quantified, specific, legally defensible — resolves a lot of conversations.

What to do tonight

1. Check your Udyam status. If you're not registered, register at udyamregistration.gov.in. Fifteen minutes.
2. List every invoice that's more than 45 days overdue. That's your active MSME Act portfolio.
3. For each one, calculate the interest owed (above example shows the method). Send the buyer a polite note with the updated figure.
4. If you don't want to do this manually every time, Vasuli automates all of it — the tracking, the escalation, the demand notice, even the Samadhaan filing prep. Start free for up to 10 invoices.

FAQ

Does this apply if my buyer is also a small business?

Yes. The Act protects the registered MSME supplier regardless of the buyer's size. The buyer has to pay irrespective of their own MSME status.

What if I signed a contract saying 120-day payment terms?

Section 17 of the Act explicitly overrides any agreement that extends payment beyond the 45-day limit for MSMEs. Contract clauses to the contrary are void.

Is the Samadhaan process fast?

MSEFC is legally mandated to conclude proceedings within 90 days of reference. In practice it varies, but it's significantly faster than filing a civil suit.

What does it cost to file a Samadhaan complaint?

Filing is free. There are nominal fees for arbitration if the case goes that far — typically a small percentage of the claim amount.

Does this work for service businesses?

Yes. The Act says "goods or services" — consulting, IT services, jobwork, anything you've invoiced for.

---

Recover your money without a lawyer. Vasuli automates the entire MSME Act escalation ladder — reminders, demand notices, Samadhaan prep. Add your first overdue invoice — free for up to 10.