In a significant move aimed at supporting small and medium enterprises (SMEs), the Government e-Marketplace (GeM) has announced a reduction in transaction charges for sellers and service providers involved in public procurement. The initiative, which is part of the government’s 100-day plan to foster a more business-friendly environment, aims to democratize access to public procurement and facilitate ease of doing business.

As per the new policy introduced on August 9, 2024, all orders valued up to Rs 10 lakh will now incur zero transaction charges. This is an increase from the previous threshold of Rs 5 lakh, meaning a larger volume of transactions will benefit from this significant cost reduction. For orders ranging between Rs 10 lakh and Rs 10 crore, the transaction fee will be adjusted to 0.30% of the total order value, down from the previous charge of 0.45%.

Additionally, for orders exceeding Rs 10 crore, a flat fee of Rs 3 lakh will apply, a drastic reduction from the former cap of Rs 72.5 lakh. This change represents a major shift in GeeM’s fee structure, with estimates indicating that approximately 97% of transactions conducted through the platform will not incur any transaction charges.

Ajit B Chavan, Additional CEO of GeM, described these changes as a “watershed moment” for enhancing the ease of doing business on the portal. He emphasized the government’s commitment to reducing transaction costs, stating that the new fee structure aligns with their goals of promoting inclusivity and accessibility within the public procurement ecosystem.

The objective of lowering transaction charges is particularly aimed at empowering MSEs, which frequently encounter financial barriers that impede their participation in public tenders. By easing these fiscal constraints, GeM is striving to create a more level playing field where smaller enterprises can compete effectively and contribute to innovation within public procurement.

GeM serves as a unified digital platform established in 2016, designed to streamline the procurement process for various governmental entities, including central ministries, state departments, and public sector enterprises. The platform was created to eliminate traditional manual procurement processes that often suffer from inefficiencies and corruption.

The implications of these changes could be profound. For instance, a small business engaging in government contracts can save a substantial amount of funds that can be redirected towards enhancing their operational capabilities or innovation initiatives. With the new structure in place, the financial burden associated with participation in government procurement will be significantly alleviated, allowing these enterprises to focus more on delivering quality products and services rather than wrestling with high transaction costs.

Furthermore, this move by GeM reflects a broader trend toward digitization and modernization within governmental operations. By simplifying the procurement process and reducing costs, the government not only supports smaller businesses but also fosters a more competitive environment where quality and efficiency can thrive.

As businesses adjust to these new changes, it will be essential for them to navigate the updated GeM portal effectively. Companies must stay informed about the new thresholds and charges, ensuring they take full advantage of the opportunities presented by this shift.

In conclusion, the recent adjustments in GeM’s transaction charge structure mark a pivotal moment for public procurement in India. By prioritizing the needs of smaller enterprises and eliminating financial barriers, the government is taking significant steps toward fostering a more inclusive economic landscape. This initiative not only signifies a new era for e-procurement in India but also reinforces the government’s ongoing commitment to ease the business environment for all stakeholders involved.