MSMED s.15: Set invoice deadline — on acceptance

Every invoice from a micro or small enterprise supplier carries a statutory payment deadline, whether your purchase order mentions one or not. With a written payment agreement, the deadline is the agreed date, and the agreed period cannot exceed 45 days from acceptance; without one, payment is due before the appointed day (MSMED Act, 2006, s.15). Miss the deadline and two consequences start running on their own tracks: compound interest to the supplier (s.16) and a tax deduction available only in the tax year of actual payment, which defers it only if payment slips past the year-end (Income-tax Act, 2025, s.37(1) and (2)(g)).

The payment-deadline framework sits in sections 2(b), 15 and 16 of the MSMED Act, 2006.

Agreement or appointed day — no third option

Section 15 has exactly two branches. Branch one: the buyer and supplier have agreed a payment date in writing — then payment is due on or before that date, and the proviso to s.15 says the period agreed in writing shall in no case exceed forty-five days from the day of acceptance or deemed acceptance.

Branch two: there is no such written agreement — then payment is due before the appointed day, which s.2(b) defines as the day immediately after the expiry of fifteen days from the day of acceptance or deemed acceptance. Many companies live on branch two without realising it: a phone understanding is not an agreement in writing, and whether an email trail or onboarding form records a date "agreed upon ... in writing" (s.15) depends on what it actually says.

The practical consequence: a buyer with no written payment terms who assumes "60 days is normal" is in default once the appointed day arrives. Put real agreements in place or pay before the appointed day — s.15 recognises no middle ground.

Put real agreements in place

As a practical control, a written payment agreement should name the parties and state the payment period in days from a defined acceptance event, agreed before the supply rather than produced during a dispute. Standardise it inside vendor onboarding: every new MSE vendor signs payment terms alongside the NDA and bank details, and the terms master in the purchase system mirrors the signed page. That single onboarding control moves a vendor from the 15-day appointed-day branch to an agreed date within the 45-day limit.

Check your position first

Enter these inputs per invoice. The deadline is computed invoice by invoice, never on vendor balances.

Acceptance — actual and deemed

Acceptance is the event the whole clock hangs on. Both s.2(b) and the proviso to s.15 run from "the day of acceptance or the day of deemed acceptance" of the goods or services. Under the Explanation to s.2(b), the day of acceptance is the day of actual delivery of goods or rendering of services; if the buyer objects in writing within fifteen days of delivery, it is the day the supplier removes that objection. Where no written objection is made within fifteen days, the day of deemed acceptance is the day of actual delivery. A later GRN or sign-off date does not move the clock.

Do it in order

• Confirm the supplier's status as a micro or small enterprise with dated evidence as at the supply date — the tax consequence in s.37(2)(g) of the Income-tax Act, 2025 applies to amounts payable to a micro or small enterprise.
• Establish acceptance: the day of actual delivery (s.2(b), Explanation), or, if you objected in writing within 15 days of delivery, the day the supplier removed the objection.
• Select the branch: written agreed date (period not exceeding 45 days) or appointed day (no written agreement) — s.15.
• Compute the due date per invoice and schedule payment inside it — diary the date, not just the invoice.
• Preserve the written objection and the supplier's removal of it, with dates, for any invoice where acceptance was deferred; an objection not made in writing within 15 days of delivery does not defer the clock.
• Feed the consequences: the same due dates drive the s.16 interest computation and the s.37 tax working — one calculator, two outputs.

Worked example: ₹2 lakh invoice, three scenarios

Take a ₹2,00,000 MSE invoice for goods delivered and accepted on 5 May 2026.

The dates above count the days from the day after acceptance (General Clauses Act, 1897, s.9(1)). If the acceptance day itself is counted as day one, each date moves one day earlier (19 May, 3 June, 18 June); diary the earlier date to be safe under either count.

The 60-day term cannot be relied on: the proviso says the agreed period shall in no case exceed 45 days, but it does not say what date replaces a longer term. Forty-five days from acceptance is the outermost date s.15 allows; if the over-long term is treated as no valid agreement, the earlier appointed-day date applies instead. Renegotiate over-long terms now rather than testing the point in a dispute.

What the deadline triggers

Interest to the supplier. If the buyer does not pay as required by s.15, it is liable to pay compound interest with monthly rests on the amount, from the appointed day or, where a date was agreed in writing, from the day immediately following that date, at three times the bank rate notified by the Reserve Bank — notwithstanding anything in the agreement (MSMED Act, 2006, s.16). That interest is not allowed as a deduction in computing income (s.23). Section 23 names the Income-tax Act, 1961, now repealed (Income-tax Act, 2025, s.536(1)). Under the General Clauses Act, 1897, s.8(1), references to a repealed and re-enacted provision are read as references to the re-enacted provision unless a different intention appears, so s.23 is likely to apply to computation under the 2025 Act. We have not found a ruling or CBDT clarification on the point.

Tax deduction moves to the year of payment. For tax years from 1 April 2026 (Income-tax Act, 2025, s.1(3)), an amount payable to a micro or small enterprise beyond the time limit in s.15 is deductible only in the tax year in which it is actually paid (s.37(1) and (2)(g)). Unlike the other sums listed in s.37(2), there is no relief for paying after year-end but before the return due date — s.37(3) expressly excludes clause (g). A sum already deducted in the year the liability was incurred is not deducted again when paid (s.37(5)). Periods before 1 April 2026 fall under the Income-tax Act, 1961, whose s.43B corresponds to s.37.

Neither consequence cancels the other, and both are computed from the same acceptance evidence.

FAQ

Is it 15 days or 45 days?

It depends on the branch: before the appointed day (the day after fifteen days from acceptance) where there is no written agreement, or the date agreed in writing, which cannot be more than 45 days from acceptance, where there is one (s.2(b), s.15).

Does a purchase order count as a written agreement?

Section 15 asks whether a payment date was "agreed upon between him and the supplier in writing". A PO that records payment terms the supplier has agreed to may meet that test; a unilateral PO number with no terms does not record any agreed date. Test the document, not its title.

Does paying late but in full avoid all consequences?

No. Interest under s.16 runs from the appointed day or, where a date was agreed in writing, from the day immediately following that date, compounded monthly, and is not deductible (s.23). The invoice amount itself is deductible only in the tax year in which it is actually paid, which defers it only if payment slips past the year-end (Income-tax Act, 2025, s.37(1) and (2)(g)).

Sources

• Micro, Small and Medium Enterprises Development Act, 2006: s.2(b) (appointed day), s.15 (liability of buyer to make payment; 45-day proviso), s.16 (interest), s.23 (interest not deductible)
• General Clauses Act, 1897, s.8(1); Income-tax Act, 2025, s.536(1) (repeal of the 1961 Act)
• Income-tax Act, 2025: s.1(3) (commencement, 1 April 2026), s.37(1), (2)(g), (3) and (5) (deduction only on actual payment)
• Income-tax Act, 1961 to 2025 section mapping: s.43B corresponds to s.37
• The company's GRNs, acceptance proofs, written agreements, dispute files and payment records

What to send for a review

Send your MSE invoice list with delivery, acceptance and agreement facts plus payment dates. The review returns your invoice-level statutory due dates with the overdue and interest flags, ready to feed the tax working for the closing year.