The Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026

PIB Backgrounder The Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026 प्रव तथ: 11 AUG 2026 6:05PM by PIB Delhi Reforms for a Growing MSME Sector The Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026, was passed by the Parliament in August 2026. It updates the existing MSMED Act, 2006 to align its provisions with the requirements of the MSME sector. The amendments seek to reduce payment-related constraints, make dispute resolution more time-bound and simplify compliance. Their broader objective is to facilitate the growth, development and competitiveness of MSMEs while promoting Ease of Doing Business.

Introduction The MSME Development (Amendment) Bill, 2026 was passed by the Parliament in August 2026. The importance of this amendment stems from the sector’s growing role in India’s economy. The Micro, Small and Medium Enterprises Development Act (MSMED Act) was notified in 2006. Since then, the MSME ecosystem has expanded in scale, diversity and digital reach.

According to the Economic Survey 2025-26, MSMEs account for 31.1% of GDP, 35.4% of manufacturing output and 48.58% of exports. As on August 2026, 9.16 crore MSMEs are registered on the Udyam platform, employing more than 40 crore people. Technological advances and IT-enabled systems have further transformed the MSME landscape. These enterprises now operate across rural, semi-urban and urban areas and participate more actively in formal supply chains.The MSME Development (Amendment) Bill, 2026 builds on this foundation. It aims to align the legal framework with the sector’s changing needs and its growing economic significance.

Changes introduced in the Bill The 2026 Bill revises certain specific provisions under the MSMED Act, 2006. Details of key areas of

reform are highlighted below:

Areas of Reform The Micro, Small and The Micro, Small, and Medium Medium Enterprises Enterprises Development (Amendment) Development Act, 2006 Bill, 2026

MSME MSMEs are classified on the MSMEs are classified on the basis of:

Classification basis of prescribed investment a. investment in plant and machinery or

thresholds for: equipment; and a. plant and machinery in b. turnover. manufacturing; and b. equipment in services.MSME Registration Medium enterprises engaged The Bill makes filing of the memorandum in manufacturing are free and voluntary for all MSMEs.

required to file a The Central Government shall notify a memorandum with specified national platform for the purpose. State authority. Filing of governments may also notify State digital memorandum is voluntary for platforms.

other MSMEs.

State scheme benefits may be extended to MSMEs registered on the national and state- level platform.

Payments through Addressed through All Central Public Sector Enterprises Trade Receivables introduction of a new provision (CPSEs) are required to settle invoices for Discounting System in the Bill. goods and services procured from MSMEs

(TReDS) through the TReDS platform. This aims to address payment-related issues faced by MSMEs.

States may mandate their Public Sector Enterprises (PSEs), authorities, or entities to use TReDS for invoice settlement.

Micro and Small State Governments may State Governments can establish multiple Enterprises establish one or more MSE MSEFCs to enable faster resolution of Facilitation Facilitation Councils. payment-related disputes. They are also Councils (MSEFCs) empowered to provide adequate Framework infrastructure and resources, including physical infrastructure, digital systems and trained manpower, as may be necessary.Mediation and The MSEFCs or referred Central Government may establish an Arbitration mediation service providers are online mechanism for conducting online authorised to settle payment mediation or arbitration.

disputes by mediation.

Specific timelines have been introduced for

Where a mediation is not mediation and arbitration: successful, the dispute may be a. The MSEFC or mediation service referred for arbitration. provider must complete mediation within 90 days from the date fixed for the first appearance.

b. If mediation is terminated, the MSEFC are required to refer the matter for arbitration within 30 days. c. The MSEFC or an institution or centre providing alternative dispute resolution services must make the arbitral award within 90 days from the completion of pleadings.

Dispute Resolution Application to set aside a The Bill also allows such applications.

Council’s order/ award may be While the application is pending, the court filed in court after depositing may direct that a reasonable portion of 75% of the awarded amount. the deposited amount be paid to the MSME supplier.

Courts shall direct payment to MSE suppliers when an application to set aside a decree, award or order remains pending for more than six months. The payment must be at least 50% of the awarded amount.

Recovery of Dues Addressed through Mediated settlement agreement or arbitral introduction of a new provision award can be recovered as ‘arrears of land in the Bill. revenue’. This applies to agreements or awards made under Section 18 by the Facilitation Council, a mediation service provider or an alternative dispute resolution institution.

Recovery may be undertaken through the District Collector, Deputy Commissioner or another notified authority. The notified authority must have jurisdiction over the location of the buyer’s assets.Decriminalisation of Wilfully providing false Non-filing of registration or non-supply of

Offences registration information attracts information: Earlier, these violations a fine of up to ₹1,000 for the attracted conviction and a fine. The penal first conviction and ₹1,000- provisions have now been decriminalised.

₹10,000 for subsequent

Furnishing incorrect information: A convictions. warning will be issued for the first instance, Failure to report unpaid dues to followed by a penalty for the second and MSME suppliers in annual subsequent instances.

accounts attracts a fine of at Non-disclosure of unpaid dues by buyers: least ₹10,000.

It now attracts a warning for the first instance, a penalty for the second and a fine for the third and subsequent instances.

Digital and Institutional Support The reforms introduced by the Bill are supported by digital platforms and institutional mechanisms established across the MSME ecosystem.

Expanding Formal Recognition: The Udyam Registration Portal gives MSMEs official recognition through a free, paperless and self-declaration-based online process. The Udyam Assist Platform complements this initiative by formally recognising informal micro enterprises. This includes enterprises without GST registration or coverage under the Income Tax system, based on data verified by authorised partners.

Improving Access to Financing: TReDS is an electronic platform that enables MSMEs to finance or discount trade receivables. It operates in accordance with guidelines issued by the Reserve Bank of India.

The value of invoices discounted through the platform rose from ₹40,000 crore in 2022-23 to ₹3.47 lakh crore in 2025-26.

Enabling Online Dispute Resolution (ODR): The ODR Portal was launched in June 2025. It offers MSEs a low-cost, end-to-end digital mechanism for resolving delayed payment disputes, including small- value claims.

Strengthening the MSEFC Network: 161 MSEFCs have been established across States and Union Territories. MSEFCs are set up to adjudicate disputes arising from payment delays faced by Micro and Small Enterprises.

Conclusion The MSME Development (Amendment) Bill, 2026 seeks to strengthen the foundations of an MSME’s journey from a small enterprise to a growing business. It provides for a stronger regulatory framework to help MSMEs operate and expand in an evolving business environment.

References:

Rajya Sabha:

https://sansad.in/rs/legislation/bills Ministry of Micro, Small & Medium Enterprises:

https://www.pib.gov.in/PressReleasePage.aspx?PRID=2296358&reg=48&lang=1

https://www.pib.gov.in/PressReleasePage.aspx?PRID=2209712&lang=1&reg=3https://www.pib.gov.in/PressReleasePage.aspx?PRID=2284414&reg=3&lang=1

Ministry of Finance:

https://www.pib.gov.in/PressReleasePage.aspx?PRID=2219984&reg=48&lang=2

PIB Archives:

https://www.pib.gov.in/PressReleasePage.aspx?PRID=2278107&reg=48&lang=2

https://www.pib.gov.in/PressReleasePage.aspx?PRID=2260904&lang=1&reg=3

Others:

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