New Delhi: The Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026 was passed by the Lok Sabha on Friday, August 7, 2026, after being passed by the Rajya Sabha on August 3, 2026. The Bill seeks to strengthen the legal and institutional framework governing Micro, Small and Medium Enterprises (MSMEs), particularly by improving payment mechanisms, dispute resolution and ease of doing business for the sector.
The Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) was notified in 2006 and has now completed 20 years since its enactment. The amendments seek to modernise the framework in line with the changing needs of MSMEs and strengthen measures for their development and competitiveness.
Under the amended framework, Micro and Small Enterprises Facilitation Councils will have stringent timelines for faster adjudication of delayed-payment disputes. The legislation also provides for recovery of payments due to MSEs by allowing an arbitral award to be recovered as arrears of land revenue. To facilitate faster payments, courts will be empowered to order payment of at least 50 per cent of the awarded amount to MSME suppliers where an appeal remains pending for more than six months.
The Bill also decriminalises certain offences by replacing conviction-based fines with graded penalties and providing only a warning at the first instance. It further introduces a composite twin criterion based on turnover and investment in plant and machinery or equipment for the classification of MSMEs.
Another key provision is according permanence to the Udyam Portal as a national digital platform for free and voluntary registration of MSMEs. For all Central Public Sector Enterprises, routing the settlement of invoices through the Trade Receivables Discounting System (TReDS) will be made compulsory for procurement of goods and services from MSMEs. States will also be empowered to adopt similar provisions for their Public Sector Enterprises.
The amendment further facilitates State Governments in establishing additional Micro and Small Enterprises Facilitation Councils to ensure faster disposal of disputes. Overall, the MSME Development (Amendment) Bill, 2026 is aimed at strengthening the MSME ecosystem, ensuring quicker resolution of payment disputes, improving cash flow for smaller enterprises and providing a more supportive regulatory framework for the sector.