Buyers To Be Penalised For Late Payments On Government E-Marketplace

Buyers will now be charged 1% penalty for not paying on time on the government e-marketplace, in a move aimed at promoting prompt payments to vendors, who are mostly small businesses.

In cases where the consignee receipt and acceptance certificate is generated or issued by a buyer, and the payment is not made within 10 days, the buyer will pay 1% penal interest per month for delayed payment, the Ministry of Finance said in a memorandum on Friday. The penalty will be pro-rated, and would be applicable on all procurements made from Oct. 1, 2020.

The certificate is issued after verification and assessment of quality and quantity of goods procured on the marketplace. The document includes order quantity, rejected quantity citing reasons and quantity accepted. Once the document is issued, 100% payment needs to be made within 10 days.

This comes at a time when small businesses have been complaining about delay in payment of dues by government departments. Pending dues of state-run companies and government departments to micro, small and medium enterprises are estimated at Rs 2 lakh crore, said Anil Bhardwaj, secretary general at Federation of Indian Micro and Small and Medium Enterprises.

“This will help in developing some discipline, and a culture of timely payments for procurements that are made not just on GeM, but through tenders as well,” Bhardwaj told BloombergQuint. Most payment delays are on procurements made through tenders, and not on the marketplace, he said.

The penalty amount collected, according to the memo, will be deposited in an account maintained by the marketplace, and will be used only for education of sellers and buyers or other purposes related to it. The penalty will not be paid to the vendor, it said. Any other interest payable to vendors under any law or contractual obligations will be over and above the interest charged, it said.