In order to promote timely clearance of dues to vendors especially Micro, Small and Medium Enterprises (MSMEs), the government has decided to levy interest on late payment to vendors on the government e-marketplace (GeM). The will be applicable for all procurements made from October 1, 2020.
Clearance of dues is significant for MSMEs as it improves their liquidity and cash flow immediately.
For procurements made under government rules on GeM, buyers are mandated to make payments within 10 days after generation of Consignee Receipt and Acceptance Certificate (CRAC). GeM portal is the Commerce Ministry’s online marketplace for procurement of goods and services by various ministries and government bodies.
“It is decided that whenever a CRAC 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 at 1% per month for the delayed payment,” the Finance Ministry said in an office order.
The ministry said this has been done to promote greater discipline and timeliness in payment to vendors, especially MSMEs. Products sold on the GeM portal range from stationery used by government officials to medical products that are used on patients
“The amount collected in this regard shall be deposited in an account maintained by GeM. This interest will not be paid to vendor and will be kept by GeM in a separate account which will be used only for education of sellers/buyers etc, or other purposes related to GeM or public procurement with the prior approval of Department of Expenditure,” it said.
“This shall not cover any other interest payable to vendors under any law or contractual obligations, which will be over and above the interest charged as above.”
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