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Payables are aged from invoice date, so the MSME due date is wrong for goods or services accepted on a different day.
Start from the day of acceptance or deemed acceptance, add 15 days without an agreement or the agreed days capped at 45.
Payables ageing with delivery date, objection date, acceptance date, agreed days and legal due date columns.
A correct legal due date for every micro and small supplier invoice.
The MSME payment clock starts on the day of acceptance (or deemed acceptance) of the goods or services, not automatically on the invoice date. Under Section 15 of the MSMED Act 2006, a buyer must pay a micro or small supplier within 15 days of that day if there is no written agreement, or within the agreed period if there is one, and never more than 45 days.
The income tax rule in Section 43B(h) of the Income-tax Act 1961 uses the same periods, so a late payment also costs you the deduction for that year.
What counts as acceptance?
The MSMED Act defines two situations:
- Day of acceptance: the day goods are actually delivered or services rendered. If the buyer raises a written objection within 15 days of delivery, it becomes the day the supplier removes that objection.
- Deemed acceptance: if no written objection is raised within 15 days of delivery, the goods or services are treated as accepted on the day of delivery.
In practice, for goods this is usually the goods receipt date in your ERP, and for services the date the work was completed and signed off. An invoice raised a week after delivery does not restart the clock. Read the Act’s definitions in Section 2 alongside your process notes.
How do the dates work out?
Goods are delivered on 3 October. The supplier’s invoice is dated 10 October.
| Scenario | Clock starts | Days allowed | Legal due date |
|---|---|---|---|
| No written agreement, no objection | 3 October | 15 | 18 October |
| Written agreement for 30 days | 3 October | 30 | 2 November |
| Written agreement for 60 days | 3 October | 45 (capped) | 17 November |
| Objection on 8 October, removed on 12 October, no agreement | 12 October | 15 | 27 October |
Counting the invoice date instead would push the first row to 25 October, a week after the legal due date.
What if my agreement says 60 or 90 days?
The agreement can say so, but it does not change the legal ceiling. Section 15 allows the agreed period only up to 45 days. Beyond that, interest under the MSMED Act runs at three times the bank rate notified by RBI, compounded monthly, and the payable is deductible for income tax only in the year it is paid. Many buyers now issue 45-day terms to micro and small suppliers for this reason.
Worked example: a ₹4,80,000 service invoice
A small supplier completes a maintenance contract, and your team signs off the work on 1 October. The invoice is for ₹4,80,000.
- No written agreement: 1 October + 15 days = due by 16 October.
- 45-day written agreement: 1 October + 45 days = due by 15 November.
- If you pay on 20 November under the 45-day agreement, you are 5 days late. If this happens at year-end, for example acceptance on 1 March and payment on 20 April, the ₹4,80,000 is added back for the year, and at a 25.17% effective company rate that is ₹1,20,816 of tax moved into the next year.
How do I set this up in the payables ageing?
- Add columns for delivery or completion date, objection date, acceptance date and agreed days.
- Compute the legal due date as acceptance date plus the lower of agreed days and 45 (or 15 with no agreement).
- Age micro and small supplier invoices on that date, not the invoice date.
- Review open items weekly, and every day in the last two weeks of March.