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Para 6.3.1 - Payment Modes | KartavyaDesk

Goods Manual

Original Rule Text

6.3.1 Modes of Payment for Domestic Goods 1. Procuring Entities should make payments through the Electronic Clearance System (ECS), e.g., Real-Time Gross Settlement systems (RTGS), National Electronic Funds Transfer (NEFT) or Electronic Payment Gateways. As per RBI guidelines, the ECS mandate in RBI’s format may be obtained at the time of supplier registration and in the tender document. The Format is available with all Banks. 2. However, if ECS payments are not feasible, payments may be made in exceptional circumstances by cheque/demand draft drawn on a Government treasury or branch of RBI or any Scheduled Commercial Bank authorised by RBI for transacting Government business. 3. Such payment can also be made to the supplier's bank if the bills are endorsed in favour of the bank with a pre-receipt embossed on the bills with the words "received payment" and the supplier authenticates both the endorsement and pre-receipt. In addition, an irrevocable power of attorney is to be granted by the supplier in favour of the bank. 4. Trade Receivables Discounting System (TReDS) is an electronic platform for facilitating the financing / discounting of trade receivables of Micro, Small and Medium Enterprises (MSMEs) through multiple financiers. These receivables can be due from corporates and other buyers, including Government Departments and Public Sector Undertakings (PSUs). Payments can also be made through this platform to MSE suppliers.

What This Means

Para 6.3.1 of the Manual for Procurement of Goods, 2017, outlines how government departments should pay suppliers for goods they've purchased. The main goal is to use electronic payment methods whenever possible. This makes transactions faster, more transparent, and reduces the risk of errors. Think of it like paying your bills online instead of writing a check. This rule applies to all government departments and agencies when buying domestic goods. It directly affects suppliers who do business with the government, encouraging them to adopt electronic payment systems.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Key Points

  • •Electronic payments (ECS, RTGS, NEFT, Electronic Payment Gateways) are the preferred method for paying domestic suppliers.
  • •RBI's ECS mandate format should be obtained during supplier registration and included in tender documents.
  • •Cheque/Demand Draft payments are allowed only in exceptional circumstances when electronic payments are not feasible.
  • •Payments can be made to the supplier's bank if the bill is endorsed in favor of the bank with a pre-receipt and an irrevocable power of attorney.
  • •Trade Receivables Discounting System (TReDS) can be used for payments to MSE suppliers.

Practical Example

The Ministry of Textiles needs to purchase cotton yarn from a local supplier, 'Bharat Yarns,' for Rs. 5,00,000. Following Para 6.3.1, the Ministry's accounts department first attempts to pay Bharat Yarns through NEFT. Bharat Yarns is already registered with the Ministry and has provided their bank details and the ECS mandate. The payment is successfully processed electronically. However, if Bharat Yarns' bank server was down, and NEFT was temporarily unavailable, the Ministry could, as an exception, issue a cheque drawn on a scheduled commercial bank authorized for government business, ensuring proper documentation and approval for the deviation from the preferred electronic method.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Frequently Asked Questions

What is ECS and why is it preferred?▼
ECS (Electronic Clearing System) is a way to transfer funds electronically. It's preferred because it's faster, more secure, and reduces paperwork compared to traditional methods like cheques.
When can we use a cheque instead of electronic payment?▼
Cheques should only be used in exceptional circumstances when electronic payment methods are not feasible, such as temporary system outages or if the supplier lacks the necessary infrastructure.
What is TReDS and how does it help MSMEs?▼
TReDS (Trade Receivables Discounting System) is an electronic platform that helps MSMEs get their invoices financed quickly. It allows them to get paid faster by discounting their receivables with multiple financiers, improving their cash flow.
What is an ECS mandate and where do I get it?▼
An ECS mandate is a form authorizing the government to debit funds from the supplier's bank account for payments. The format is available with all banks as per RBI guidelines.
What documents are needed if payment is made to the supplier's bank?▼
If payment is made to the supplier's bank, the bills must be endorsed in favor of the bank with a pre-receipt embossed on the bills with the words 'received payment,' and the supplier must authenticate both the endorsement and pre-receipt. Additionally, an irrevocable power of attorney must be granted by the supplier in favor of the bank.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Test Your Knowledge

Question 1 of 3

According to Para 6.3.1 of the Manual for Procurement of Goods, 2017, what is the preferred mode of payment for domestic goods?

Related Rules

Para 9.4Manual for Procurement of Goods, 2024 - Para 9.4 - Chapter 9Para 9.5.5Manual for Procurement of Goods, 2024 - Para 9.5.5 - Chapter 9Para 1.8.2Manual for Procurement of Goods, 2024 - Para 1.8.2 - Chapter 1Para 2.2.2Manual for Procurement of Goods, 2024 - Para 2.2.2 - Chapter 2Para 2.2Manual for Procurement of Goods, 2024 - Para 2.2 - Chapter 2

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