MSMED Amendment Act 2026: Most Provisions in Force From 15 October 2026
Most of the Micro, Small and Medium Enterprises Development (Amendment) Act, 2026 has been in force since 15 October 2026. The Ministry of MSME notification S.O. 5575(E) of 12 October 2026 brought sections 2 to 7, 11 and 13 to 17 of the Amendment Act into force on that date. Section 12 follows on 15 December 2026. Sections 8 to 10, the faster dispute timelines, recovery of awards as arrears of land revenue and the 50 per cent release rule on challenged awards, have not been brought into force yet.
Here is what is live now, who it touches and what to check before the next audit and filing season.
What came into force on 15 October 2026
- Free, voluntary registration (new section 8). The Central Government is to notify a national digital platform for free and voluntary filing of the MSME registration memorandum. States may notify their own platforms and extend state scheme benefits to enterprises registered on the national one.
- Classification (section 7). Enterprises are classified on both investment in plant and machinery or equipment and turnover. Pollution control, R&D, industrial safety devices and other notified items are excluded from investment. No new limits were notified with the commencement.
- TReDS for CPSEs (new section 15A). Every Central Public Sector Enterprise must route settlement of invoices for goods or services bought from MSMEs through an RBI-authorised TReDS platform, in the form and manner prescribed. The Centre and States can notify other bodies to do the same.
- TReDS disclosure (new section 22A). CPSEs and other notified bodies must disclose the MSME invoices routed and settled through TReDS.
- More Facilitation Councils (new section 20). States must set up an adequate number of Micro and Small Enterprises Facilitation Councils (MSEFCs) in addition to the existing ones.
- Penalties decriminalised (new sections 27 and 27A). Criminal fines are replaced by a warning-then-penalty structure, adjudicated by the Development Commissioner, with an appeal to the Secretary of the MSME Ministry within 30 days.
The new penalty structure
| Default | First instance | Second instance | Third and later |
|---|---|---|---|
| Wilfully false information in the registration memorandum, or not furnishing information under section 26(2) | Warning | ₹1,000 to ₹50,000 | ₹1,000 to ₹50,000 |
| Buyer not disclosing unpaid MSE dues in its audited accounts (section 22) | Warning | ₹10,000 to ₹50,000 | Fine of ₹50,000 to ₹1 lakh |
The minimum amounts rise by 10 per cent after every three years from commencement, as the Centre notifies. Unpaid penalties are recoverable as arrears of land revenue. Before the amendment, a buyer that failed to make the section 22 disclosure faced a fine of at least ₹10,000 on conviction.
What is not in force yet
| Provision | What it does | Status |
|---|---|---|
| Section 12 of the Amendment Act (section 21) | MSEFCs of three to five members, chaired by an officer not below Joint Director, with at least one member from the field of law | From 15 December 2026 |
| Section 8 (section 18) | Mediation within 90 days, reference to arbitration within 30 days, award within 90 days of pleadings; jurisdiction at the supplier’s registered address | No date notified |
| Section 9 (new section 18A) | Recovery of awards and settlements as arrears of land revenue | No date notified |
| Section 10 (section 19) | 75 per cent pre-deposit to challenge an award; at least 50 per cent released to the supplier if pending over six months | No date notified |
What it does not change
Sections 15 and 16 of the MSMED Act, the 45-day payment limit and compound interest at three times the bank rate, are not amended. So the income tax disallowance under section 43B(h) for late payments to micro and small suppliers works as before. Our note on the section 43B(h) 45-day disallowance covers it. Pending MSEFC cases continue under the existing section 18 procedure until sections 8 to 10 are notified.
What to do now
- Buyers with audited accounts: make sure the FY 2025-26 accounts carry the section 22 disclosure of principal and interest unpaid to micro and small suppliers. A repeat default now carries a monetary penalty.
- MSME suppliers: check that your registration details are accurate. Wilfully false information can now be penalised after one warning.
- Suppliers to CPSEs: if you are not on a TReDS platform, start onboarding, since CPSE payments for MSME invoices are to be routed through it.
- Payment disputes: plan on the current timelines; the 90-day limits and the 50 per cent release rule apply only once notified.
Need help with MSME compliance?
TAXAJ handles MSME Udyam registration and the annual ROC filings that carry your MSME disclosures. Follow the latest changes on our MCA news and updates page.
Source: PIB factsheet on the MSMED (Amendment) Bill, 2026, enacted as Act No. 16 of 2026; Ministry of MSME notification S.O. 5575(E) dated 12 October 2026. Last updated 21 October 2026. This is general information, not advice on any particular case.
