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Jul 15, 2020
Govt to levy 1 per cent interest on late payment to MSMEs for GeM purchase

In order to promote greater discipline and timeliness of payments to vendors, especially Micro, Small and Medium Enterprises (MSMEs), the government has decided to levy a 1 per cent interest per month on late payments for purchases made on the government e-marketplace (GeM).

The order which will be effective on all procurements made from October 1, 2020 comes at a time when most MSMEs are facing a severe liquidity crunch due to COVID-19 pandemic.

Taking to micro-blogging site, the Union Finance Minister, on Friday, said, "It is decided that whenever a Consignee Receipt and Acceptance Certificate is auto-generated or issued by a buyer and payment is not made 10 days hereafter, the buyer organisation will have to pay penal interest @ 1% per month for the delayed payment".

"Government has been repeatedly emphasizing the need for prompt payment to vendors, especially MSME vendors" an office memorandum from the Department of Expenditure of the Ministry of Finance said.

As per rule 149 of the General Financial Rules 2017, buyers are mandated to make payments within ten calendar days after the CRAC has been generated in the GeM.

According to the order, interest will be charged from the first day beyond the ten-day period until the payment is made. The late payment levy shall be over and above any other interest charges applicable as per the contract between the buyer and seller, it said.

However, this very interest will not go to the MSMEs concerned and instead, will be deposited in an account maintained by the GeM, which will be used only for the education of buyers and sellers or public procurement with the prior approval of the Department of Expenditure, said the office memorandum.

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