MSMEs Can Now Submit Refund Claims For Forfeited Amount By July 31

Through Office Memorandum dated June 2, 2023, the Ministry of Finance’s Expenditure Department granted a one-month extension, until July 31, for Micro, Small, and Medium Enterprises (MSMEs) to submit refund claims for performance or bid security forfeited and liquidated damages deducted during the Covid-19 period. The government seeks to alleviate the burden on MSMEs by offering relief through the ‘Vivad Se Vishwas-I’ scheme, announced in the 2023-24 Budget by the Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman.

The scheme ensures that in cases where MSMEs were unable to fulfil contracts during the Covid-19 period, 95% of the performance security, bid security, and liquidated damages that were forfeited or deducted from MSME firms will be refunded by the government and government undertakings. Effective from April 17, 2023, the scheme was initially set to have a claim submission deadline of June 30. However, the same has been extended to July 31.

Additionally, certain relief has been granted to MSMEs that faced debarment due to contract execution defaults during the Covid-19 period, extending until March 31, 2022. Contractors or suppliers registered as MSMEs with the Ministry of MSME as of March 31, 2022, are eligible to claim a refund for forfeited amounts related to contracts with an original delivery or completion period between February 19, 2020, and March 31, 2022.

The office memorandum also specifies the amendments made with respect to the eligibility requirements. Firstly, it is clarified that all procurements would be covered under the scheme and not merely procurement of goods and services. Secondly, in order to be eligible under the scheme, an MSME may be registered for any category, not necessarily a category of goods and services.

To facilitate the implementation of this scheme, the Government e-Marketplace (GeM) has established a dedicated web page. Only eligible claims will be processed through GeM, and it applies to all contracts for procurement entered into by Central Government procurement entities including ministries, departments, attached or subordinate offices, autonomous bodies, Central Public Sector Enterprises (CPSEs), Central Public Sector Banks, financial institutions, etc. with MSMEs.