The Central Government has notified October 15, 2026, as the commencement date for several provisions of the Micro, Small and Medium Enterprises Development (Amendment) Act, 2026, including the requirement for Central Public Sector Enterprises to route settlement of MSME invoices through a Trade Receivables Discounting System (TReDS) platform authorised by the Reserve Bank of India.

The Ministry of Micro, Small and Medium Enterprises issued Notification S.O. 5575(E) on October 12, 2026, bringing sections 2 to 7, section 11, and sections 13 to 17 of the Amendment Act into force from October 15. Section 12, which revises the composition of Micro and Small Enterprises Facilitation Councils, will take effect on December 15, 2026.

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Mandatory TReDS Routing For Central Public Sector Enterprises

Section 7 of the Amendment Act inserts a new section 15A into the MSMED Act, 2006. It requires every Central Public Sector Enterprise, in respect of procurement of goods or services from micro, small and medium enterprises, to route settlement of invoices through an RBI-authorised TReDS platform, in the form and manner prescribed by the Central Government.

The provision covers all three categories of enterprises—micro, small and medium. It also empowers the Central Government to extend the requirement to other authorities, bodies or entities through a notification.

State Governments may similarly notify State Public Sector Enterprises or other authorities, bodies and entities that must route settlement of MSME invoices through TReDS.

The Act defines TReDS as an electronic platform facilitating financing or discounting of MSME trade receivables in accordance with RBI guidelines. The amendment therefore establishes a statutory requirement for routing invoice settlement through the platform, with operational procedures to be prescribed through rules.

Disclosure Of Invoices Routed And Settled

The amendments also introduce section 22A, requiring Central Public Sector Enterprises and other entities notified by the Central Government to disclose details of MSME invoices routed and settled through TReDS.

A corresponding disclosure obligation applies to State Public Sector Enterprises and other entities notified by State Governments. The form and manner of these disclosures will be prescribed by the respective governments.

Investment And Turnover To Govern MSME Classification

The substituted section 7(1) of the principal Act authorises the Central Government to classify enterprises as micro, small or medium through notifications using both investment in plant and machinery or equipment and turnover as criteria.

The provision excludes the cost of pollution control, research and development, industrial safety devices and other notified items when calculating investment in plant and machinery.

The Amendment Act itself does not specify fresh monetary thresholds for classification.

Free And Voluntary Digital Registration

The substituted section 8 requires the Central Government to notify a national digital platform for free and voluntary filing of memoranda for MSME registration, enabling enterprises to access Central Government benefits under the Act.

State Governments may notify their own digital registration platforms for applicable State benefits. The provision also clarifies that States may extend benefits under their schemes to enterprises registered on the national platform.

More Facilitation Councils And Regular Meetings

The revised section 20 requires State Governments to establish an adequate number of Micro and Small Enterprises Facilitation Councils in addition to existing councils.

Councils must meet regularly for timely resolution of references under section 18, at intervals and according to procedures prescribed by the State Government. States may also provide physical infrastructure, digital systems and trained personnel to support effective disposal of cases.

From December 15, 2026, the revised council composition will require three to five members, including a chairperson not below the rank of Joint Director, one or more representatives of micro or small enterprise associations, and at least one member from the field of law.

Warning-First Penalty Framework

The amendments introduce a warning for the first instance of wilfully furnishing false information in a registration memorandum or failing to comply with section 26(2). Subsequent instances attract penalties ranging from ₹1,000 to ₹50,000.

For a buyer’s contravention of section 22, the first instance attracts a warning. A second contravention attracts a penalty of ₹10,000 to ₹50,000, while a third or subsequent contravention is punishable with a fine of ₹50,000 to ₹1 lakh.

New section 27A provides for adjudication by the Development Commissioner, an opportunity of hearing, and an appeal to the Secretary administering the MSME Ministry or Department.

Dispute Resolution And Award Enforcement Changes Await Commencement

The October 12 notification does not appoint a commencement date for sections 8, 9 and 10 of the Amendment Act.

These sections contain changes concerning mediation and arbitration timelines, online dispute resolution, recovery of settlements and awards as arrears of land revenue, recognition of determined amounts as enforceable debts, and revised conditions for challenging awards or settlements.

Accordingly, those changes should not be treated as taking effect on October 15 under this notification. The immediate rollout principally covers TReDS routing, digital registration, classification provisions, council establishment, compliance disclosures and the revised penalty framework. 

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