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Micro, Small and Medium Enterprises Development Act, 2006

An Act to provide for facilitating the promotion and development and enhancing the competitiveness of micro, small and medium enterprises and for matters connected therewith or incidental thereto.

Sector All SectorsPurpose Corporate & CommercialAct No. 27 of 2006Enacted 16 Jun 2006Ministry Micro, Small and Medium EnterprisesUpdated till 27th September, 2026
All Acts Limited Liability Partnership Act, 2008 Negotiable Instruments Act, 1881

TaxByKK · Laws by Sector · taxbykk.comIndex as on 27th September, 2026

Index of provisions · 6 chapters, 32 sections

I PreliminaryII National Board for Micro, Small and Medium EnterprisesIII Classification of Enterprises, Advisory Committee and Memorandum of Micro, Small and Medium EnterprisesIV Measures for Promotion, Development and Enhancement of Competitiveness of Micro, Small and Medium EnterprisesV Delayed Payments to Micro and Small EnterprisesVI Miscellaneous

Chapter I Preliminary2 sections

  1. 1Short title and commencement
  2. 2Definitions

Chapter II National Board for Micro, Small and Medium Enterprises4 sections

  1. 3Establishment of Board
  2. 4Removal of member from Board
  3. 5Functions of Board
  4. 6Powers and functions of Member-Secretary of Board

Chapter III Classification of Enterprises, Advisory Committee and Memorandum of Micro, Small and Medium Enterprises2 sections

  1. 7Classification of enterprises
  2. 8Memorandum of micro, small and medium enterprises

Chapter IV Measures for Promotion, Development and Enhancement of Competitiveness of Micro, Small and Medium Enterprises6 sections

  1. 9Measures for promotion and development
  2. 10Credit facilities
  3. 11Procurement preference policy
  4. 12Funds
  5. 13Grants by Central Government
  6. 14Administration and utilisation of Fund or Funds

Chapter V Delayed Payments to Micro and Small Enterprises11 sections

  1. 15Liability of buyer to make payment
  2. 16Date from which and rate at which interest is payable
  3. 17Recovery of amount due
  4. 18Reference to Micro and small Enterprises Facilitation Council
  5. 19Application for setting aside decree, award or order
  6. 20Establishment of Micro and Small Enterprises Facilitation Council
  7. 21Composition of Micro and Small Enterprises Facilitation Council
  8. 22Requirement to specify unpaid amount with interest in the annual statement of accounts
  9. 23Interest not to be allowed as deduction from income
  10. 24Overriding effect
  11. 25Scheme for closure of business of micro, small and medium enterprises

Chapter VI Miscellaneous7 sections

  1. 26Appointment of Officers and other employees
  2. 27Penalty for contravention of section 8 or section 22 or section 26
  3. 28Jurisdiction of courts
  4. 29Power to make rules
  5. 30Power to make rules by State Government
  6. 31Power to remove difficulties
  7. 32Repeal of Act 32 of 1993

About this Act

The Micro, Small and Medium Enterprises Development Act, 2006 (Act 27 of 2006) provides the legal framework for promoting, developing and improving the competitiveness of micro, small and medium enterprises.

The Act establishes the National Board for Micro, Small and Medium Enterprises and provides for Micro and Small Enterprises Facilitation Councils at State level to decide disputes over delayed payments.

Its 32 sections are spread across six chapters. Chapter V on delayed payments is the part most often relied on in practice: it fixes the buyer's liability to pay on time, provides for interest on late payment and denies an income-tax deduction for that interest. Section 32 repeals Act 32 of 1993.

Who it applies to

  • Micro, small and medium enterprises classified under section 7
  • Buyers of goods and services from micro and small enterprises
  • Companies and other buyers whose annual accounts must disclose amounts unpaid to micro and small suppliers
  • The Central Government, State Governments and Facilitation Councils administering the Act
  • Auditors and tax professionals reviewing MSE payables and interest

Good to know

Key chapters
Chapter III (classification and Memorandum, sections 7 and 8) and Chapter V (delayed payments to micro and small enterprises, sections 15 to 25).
Repeal
Section 32 repeals the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 (Act 32 of 1993).

Frequently asked questions

Which section of the MSMED Act classifies enterprises as micro, small or medium?

Section 7.

Which section sets the buyer's time limit for paying a micro or small supplier?

Section 15.

Where is interest on delayed payment to MSEs provided for?

Section 16 fixes the date from which and the rate at which interest is payable.

Which section allows a supplier to refer a payment dispute to the Facilitation Council?

Section 18.

Which section disallows interest on delayed payment as an income-tax deduction?

Section 23.