Self-Check
MSME Process Self-Check
How tightly does your finance function track MSME vendor compliance?
Four questions on re-verification timing, interest tracking, ownership, and payment terms.
Roughly how many active vendors does your finance function manage?
Enter your details to see your result - we will also email you the full breakdown.
This is a self-check, not a verified audit. IQSS's Diagnostic scores your actual vendor master against these checks - a portfolio health score, 0-100, with a letter grade A to D - and names the specific vendors and rules involved.
Request a DiagnosticWhat these terms mean
Udyam (MSME) registration
Udyam registration is the government's official registration for Micro, Small, and Medium Enterprises under the MSMED Act, 2006. A vendor's Udyam status can change after onboarding - registering, lapsing, or being cancelled - which is why a one-time check at onboarding does not stay accurate.
The 45-day payment window
Under Section 15 of the MSMED Act, a buyer must pay a registered MSME supplier within 15 days if there is no written agreement, or within a period agreed in writing that cannot exceed 45 days. Once that window passes, the invoice is legally overdue, not just late against the vendor's own commercial terms.
MSMED Act Section 16 - statutory interest
If payment is not made within the statutory window, Section 16 of the MSMED Act requires the buyer to pay compound interest at three times the RBI-notified bank rate, compounded monthly with monthly rests. This is a statutory liability that accrues automatically, whether or not anyone is tracking it.
Income Tax Act Section 43B(h) - payment disallowance
Section 43B(h), introduced via the Finance Act 2023, disallows the deduction of any amount payable to an MSME supplier as a business expense in that financial year if it is not paid within the timeline required by the MSMED Act. The disallowed amount becomes taxable income in the year it is due, and is only deductible in the year it is actually paid.
This is an explanation of how the law works, not tax or legal advice. Talk to your tax advisor about how these provisions apply to your specific situation.