India passes legislative amendments for MSMEs and digital payments

India's Parliament has passed two significant pieces of legislation in 2026 that impact the micro, small, and medium enterprise (MSME) sector and the digital payment landscape.

The Micro, Small and Medium Enterprises Development (Amendment) Bill 2026 was passed by the Rajya Sabha on 3 August and the Lok Sabha on 7 August. The bill aims to address structural rigidity by removing fixed investment and turnover thresholds from the MSME Act, allowing the Central Government to notify these figures instead. It also seeks to resolve issues with the existing dispute resolution mechanism, which has seen significant delays in the recovery of outstanding payments despite a 90-day arbitration timeline.

Simultaneously, the Taxation and Other Laws (Amendment) Bill, 2026, has introduced changes to the Payment and Settlement Systems (PSS) Act. This amendment provides a legal framework for the government to modify or roll back the Zero-Merchant Discount Rate (MDR) regime for UPI and RuPay transactions. While the Finance Ministry stated no charges are being levied immediately, the move allows for potential future transaction fees, which could impact the profit margins of MSMEs and digital businesses that have relied on zero-cost digital payments.