MSME- Recoveries redefined; Working Capital Assistance by Professionals!

MSME- Recoveries redefined; Working Capital Assistance by Professionals!

MSME units are facing working capital issues because on one side they are facing challenges of timely credit from formal banking channels and paying the comparatively higher interest rates and on the other, they have to extend interest-free credit to their customers as well as delayed recovery which is ultimately triggering sickness in the MSME sector.

MSME Development Act (the Act) has incorporated necessary provisions for ensuring prompt and smooth flow of funds to MSMEs and measures also to ensure timely payment to the MSME sector.

As per provisions of the Act, the buyer is duty-bound to release payment on or before the agreed date or within a period of 45 days, whichever is earlier from the day of acceptance or deemed acceptance of supply of goods and services done by MSME. Further, if the payment to MSMEs is delayed beyond the agreed period of forty-five days, the buyer is liable to pay compound interest with monthly interest at the rate of 3 times the bank rate notified by the Reserve bank of India, for the delayed period.

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If the buyer fails to make the payment within the stipulated deadline, registered MSMEs can take up the issue directly with the Micro and Small Enterprises Facilitation Council of the state (created by respective state government’s) in which their unit is situated for recovery of dues along with interest on delayed payments.

MSE Facilitation Council acts as conciliator or arbitrator and is duty-bound to solve the issue within 90 days. MSEFC is gradually gaining prominence vis-a-vis recovery suit. Where the conciliation initiated is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer it to any Institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to In sub-section (i) of section 7 of that Act.

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Every reference made under this section shall be decided within a period of ninety days from the date of making such reference.”

 An appeal (by any person other than supplier) against the award, decree or other orders of MSEFC or Centre or institution referred by the MSEFC can be entertained by any court only after deposition of 75% of the amount in terms of the decree, award to other order. Provided that pending disposal of the application to set aside the decree, award or order, the court shall order that such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case subject to such conditions as it deems necessary to impose. These provision has been validated by higher courts including Supreme Court.

In the years to come, MSEFC constituted by States will gain momentum and will become a decisive factor.

It is a great opportunity for CA in practice as they can play a vital role in hand holding the MSME sector to overcome their working capital issues and render professional services in helping them in approaching the MSE Facilitation Council for recovery of their overdue along with interest as specified in the Act. This will ultimately result in the growth of cliental, MSME sector and Nation.

Multiple circulars and GST notifications affecting progression of business

Various rates, high peak rate, multifaceted techniques and complicated returns have made India’s GST most unpredictable, aver exchange sources.

Expressing that the trade and industry had made plans to confront the early stage struggles that any new system would experience in the initial period of usage, S Rethinavelu, Senior President, Tamilnadu Chamber of Commerce and Industry said “we have entered the third year of GST execution. It is nevertheless normal for the tax payer to expect bother free progression of business and service activities, other than guaranteeing proceeding with income multiplication under GST. The GST Council should increase its drives to further streamline GST rates and methodology.”

Then again, countless fliers and notifications after the take off of GST from July 1, 2017 have confused the tax payers. To compound an already painful situation, a great number of authorities themselves are not acquainted with every one of the arrangements of the Act and Rules. Under such conditions, by what means can the honest trader, especially those in the MSME division know the standards and the Act, despite the brochures and notifications issued once in a while, asks Rethinavelu.

In the event that explanations are tried to be executed from July 1, 2017, a larger part of players in the MSME division would need to close shop, the senior leader of Tamilnadu Chamber said while emphasizing the requirement for nullifying the 28 percent GST piece and making the GST rate on services affordable for the common man.

The Chamber has additionally appealed to consider generation of e-receipt on the GST gateway for each deal dependent on certain turnover to maintain tax avoidance. “Since e-receipt is produced from the GST gateway all returns will be auto populated, leaving the vendor to just confirm the entries. This will discredit the requirement for generation of e-path bill for transporting the merchandise,” he said.

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