MSME Samadhaan Portal: How Small Businesses Can Recover Delayed Payments in 2026

Why Delayed Payments Are an MSME Crisis

Micro, Small and Medium Enterprises (MSMEs) contribute roughly 30% to India's GDP and employ over 11 crore workers. Yet the single biggest reason small businesses fail is not lack of orders — it is delayed payments from larger buyers. As of early 2026, MSME associations estimate that over ₹10.7 lakh crore is stuck in receivables across Indian MSMEs, with average payment delays stretching well beyond the statutory 45-day window.

The government has responded with a two-pronged approach: the MSME Samadhaan portal for dispute resolution and Section 43B(h) of the Income Tax Act, which disallows expense deductions to buyers who fail to pay MSMEs on time. Together, these tools have shifted the balance of power meaningfully toward small suppliers.

The 45-Day Rule Under the MSMED Act

Section 15 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 requires any buyer to pay a registered micro or small enterprise (MSE) within:

• •The date agreed in writing, but not exceeding 45 days from acceptance/deemed acceptance of goods or services, OR
• •15 days from delivery if no written agreement exists

If the buyer fails to pay within this period, they become liable to pay compound interest at three times the RBI bank rate (as of August 2026, the RBI bank rate is 5.75%, so the applicable interest is roughly 17.25% per annum, compounded monthly).

Importantly, this interest is not tax-deductible for the buyer under Section 23 of the MSMED Act — making late payment doubly painful for defaulters.

Section 43B(h): The Game-Changer

Introduced by Finance Act 2023 and now in its third year of enforcement, Section 43B(h) of the Income Tax Act states that any sum payable to a micro or small enterprise beyond the timeline specified under Section 15 of the MSMED Act is allowed as a deduction only in the year in which payment is actually made — not on accrual basis.

This means if a buyer with a March 2026 year-end has unpaid MSE dues beyond 45 days as on 31 March 2026, that expense cannot be claimed in FY 2025-26. It gets pushed to FY 2026-27 (when actually paid), inflating current-year taxable income.

For medium enterprises, Section 43B(h) does not apply — only micro and small suppliers are protected. This is why Udyam registration category matters enormously.

Udyam Registration: The Prerequisite

To claim protection under both the 45-day rule and Section 43B(h), the supplier must be registered as a Micro or Small Enterprise on the Udyam portal (udyamregistration.gov.in) at the time the goods/services were supplied.

As per the revised MSME classification effective April 2025:

Registration is free, requires only Aadhaar and PAN, and can be completed online in under 30 minutes. Buyers routinely ask for the Udyam Registration Number (URN) on invoices — supplying it is now standard practice.

How the MSME Samadhaan Portal Works

The MSME Samadhaan portal (samadhaan.msme.gov.in) is the online dispute resolution system operated by the Ministry of MSME. Here is the step-by-step process:

Step 1: File a Reference

The MSE supplier logs in using Udyam number and Aadhaar-linked mobile OTP, then files a case detailing the unpaid invoice(s), buyer information, and total dues including interest calculation.

Step 2: Buyer Notification

The buyer receives an automated notice and has 15 days to either pay or respond with objections. Reputational risk is real — the portal publicly lists cases against government departments and CPSEs.

Step 3: MSEFC Conciliation

If unresolved, the case moves to the Micro and Small Enterprise Facilitation Council (MSEFC) in the supplier's state. The Council attempts conciliation within 90 days.

Step 4: Arbitration

If conciliation fails, MSEFC conducts arbitration under the Arbitration and Conciliation Act, 1996. The entire process — from filing to award — must conclude within 90 days of reference.

Step 5: Enforcement

An MSEFC award is enforceable as a decree of a civil court. Notably, if the buyer appeals, they must first deposit 75% of the award amount under Section 19 of the MSMED Act — a strong deterrent against frivolous appeals.

Practical Documentation Every MSE Must Maintain

Winning at Samadhaan depends on paperwork. Ensure you have:

• •Purchase orders or written contracts clearly stating payment terms
• •Tax invoices with your Udyam Registration Number printed prominently
• •Proof of delivery (signed challans, e-way bills, digital acknowledgements)
• •Email trails requesting payment (dated reminders after 30, 45, 60 days)
• •Bank statements showing non-receipt
• •Interest calculation sheet based on three times RBI bank rate

Without these, even a valid claim can drag on for months.

Interaction with TReDS Platforms

The Trade Receivables Discounting System (TReDS) — regulated by RBI — allows MSMEs to auction their receivables to financiers for immediate liquidity. As of 2026, all companies with turnover above ₹250 crore are mandated to onboard TReDS platforms (RXIL, M1xchange, Invoicemart).

If your buyer is TReDS-onboarded, you may not need Samadhaan at all — simply upload the invoice, get it accepted, and receive 90-95% of the value within 48 hours at competitive discounting rates (typically 8-10% p.a. in 2026). TReDS is often the fastest route to working capital.

Common Mistakes MSEs Make

1. Not printing Udyam number on invoices — buyers later claim they were unaware of MSE status

2. Waiting too long — filing after 3 years of the due date makes the claim time-barred

3. Accepting partial payments without protest — this can be interpreted as settlement

4. Ignoring Section 43B(h) leverage — a polite reminder to the buyer's CFO about their tax consequence often unlocks payment faster than any legal notice

The Bigger Picture: Cash Flow Discipline

While these legal tools are powerful, prevention beats cure. Build a credit policy: run credit checks on new buyers, insist on advance payments for high-risk accounts, use invoice factoring for large orders, and diversify your customer base so no single buyer exceeds 25% of receivables.

E-Square Tip: Add a standard clause to every invoice: "This supplier is a Micro/Small Enterprise registered under Udyam Registration No. [URN]. Payment is due within 45 days as per MSMED Act, 2006. Section 43B(h) of the Income Tax Act may impact deductibility for delayed payments." This single line has been shown to accelerate payment cycles by 20-30 days, purely because buyers' finance teams flag it as a compliance risk.