For Prelims: Micro, Small and Medium Enterprises (MSME), Trade Receivables Discounting System (TReDS), Public Procurement, Full form of GeM, Full form of LUB, Nodal Ministry, New Transaction Charge, Exemption Threshold
For Mains: Democratising digital procurement; Financial inclusion for MSMEs; Atmanirbhar Bharat and Viksit Bharat 2047
Source:
Why in the news?
The Government e-Marketplace (GeM) has implemented key reforms to reduce costs for Micro and Small Enterprises (MSEs) in government procurement. Transaction charges are reduced to 0.30% and the exemption threshold is raised to ₹10 lakh, aiming to enhance MSME participation and contribute to the Atmanirbhar Bharat vision. The platform has also integrated with all five TReDS exchanges to address MSMEs' working capital challenges.
Summary
- GeM reduced transaction charges from 0.50% to 0.30% and increased the exemption threshold from ₹5 lakh to ₹10 lakh, benefiting 97% of orders.
- GeM integrated with all five Trade Receivables Discounting System (TReDS) exchanges, as announced in the Union Budget 2026–27, to facilitate easier credit access for MSMEs.
- The GeM-Laghu Udyog Bharati (LUB) partnership, formalised via a 2024 MoU, has conducted 108 virtual conferences to build awareness and onboard MSMEs digitally.
Highlights
Cost Reduction
GeM slashed transaction charges to 0.30% and raised the exemption limit to ₹10 lakh to make government procurement cheaper for MSMEs.
Partnership Impact
The GeM-LUB partnership, via 108 virtual conferences, is expanding MSME access to government procurement opportunities across India.
Credit Access
Integration with all five TReDS exchanges and GeM SAHAY's collateral-free lending aims to solve MSMEs' working capital and payment issues.
Context / Background
The Government e-Marketplace (GeM) was launched to create a transparent, efficient, and inclusive platform for public procurement. MSMEs, despite being the backbone of the economy, often face barriers like high transaction costs and complex procedures in accessing government tenders. The GeM-LUB partnership, initiated in 2024, is a strategic move to bridge this gap by leveraging LUB's extensive network to onboard and train small businesses.
Core Analysis & Implications
The reforms are multi-pronged. Reducing transaction costs and raising the exemption threshold directly increases MSME profitability and incentivises participation. The removal of the Caution Money deposit (since July 2025) lowers the entry barrier. Integrating with TReDS exchanges is a significant step for financial inclusion, allowing MSMEs to discount their receivables and improve cash flow. These measures collectively strengthen the 'Trusted Seller' ecosystem, aligning with the goals of Atmanirbhar Bharat and Viksit Bharat 2047 by making business opportunities more democratised.
Future Outlook / Way Forward
The future focus will be on deepening outreach through LUB's pan-India network, setting up dedicated facilitation counters, and continuing weekly virtual conferences. The success of these reforms will be measured by increased MSME order volumes and value on GeM. Further policy support could involve linking GeM data with other credit guarantee schemes and expanding the range of products and services procured through the platform.
Background GK
Textbook concepts you need to understand this news
- Micro, Small and Medium Enterprises (MSME)
- Enterprises defined by investment in plant & machinery or equipment and annual turnover, as per the MSME Development Act, 2006. They are crucial for employment, innovation, and economic growth.
- Trade Receivables Discounting System (TReDS)
- An electronic platform for financing trade receivables of MSMEs through multiple financiers. It allows MSMEs to auction their invoices and bills of exchange to ensure timely liquidity.
- Public Procurement
- The process by which government departments and public sector units purchase goods, services, and works from the private sector. It is governed by principles of transparency, fairness, and value for money.
Facts to remember
Tap a card to see the answer. Try to recall it first.
How exams will ask this
- Data: Transaction charge reduced to 0.30% and exemption raised to ₹10 lakh.
- Nodal Body: Ministry of Commerce & Industry (parent ministry of GeM).
- Partnership: GeM-Laghu Udyog Bharati (LUB) MoU signed in 2024.
Don't make this mistake!
They may ask about the old threshold (₹5 lakh) versus the new one (₹10 lakh), or confuse the charge cap for orders above ₹10 crore (₹3 lakh) with the old cap (₹72.50 lakh). They might also ask which system GeM integrated with (TReDS) and wrongly offer options like 'UDYAM' or 'CGTMSE'.
Write these in mains answers
- Democratising digital procurement
- Financial inclusion for MSMEs
- Atmanirbhar Bharat and Viksit Bharat 2047
Practice questions
Pick an answer, then read the explanation.
- Q1Easy
The Government e-Marketplace (GeM) platform operates under which Union Ministry?
Explanation: As per the article, the news is sourced from a Press Information Bureau release of the Ministry of Commerce & Industry. GeM is a strategic initiative of this ministry to reform public procurement.
- Q2Hard
Consider the following statements regarding reforms announced for the Government e-Marketplace (GeM):
- 1.GeM has reduced the transaction charges from 1% to 0.50% of the order value.
- 2.Orders up to ₹10 lakh are now completely exempt from any transaction charges.
- 3.GeM has integrated with all five Trade Receivables Discounting System (TReDS) exchanges.
Which of the statements given above is/are correct?
Explanation: Statement 1 is incorrect: GeM reduced charges from 0.50% to 0.30%, not from 1% to 0.50%. Statement 2 is correct as per the new threshold of ₹10 lakh. Statement 3 is correct as highlighted in the article regarding integration with TReDS.
- Q3Medium
According to the news, what is the new maximum transaction charge cap for orders above ₹10 crore on the GeM portal?
Explanation: The article states that for orders above ₹10 crore, charges are capped at ₹3 lakh, which is a significant reduction from the earlier maximum of ₹72.50 lakh. This is a key data point for cost reduction.
- Q4Medium
What is the primary objective of the GeM-Laghu Udyog Bharati (LUB) partnership as highlighted in the news?
Explanation: The article explicitly states that the GeM-LUB partnership, formalised via an MoU, facilitates conferences to build awareness, support digital onboarding, and help MSMEs navigate the platform to access government procurement opportunities.
Frequently asked questions
1. What is the full form of GeM?
Government e-Marketplace
2. What is the full form of LUB?
Laghu Udyog Bharati
3. What is the nodal Ministry?
Ministry of Commerce & Industry
4. What is the new Transaction Charge?
0.30% (reduced from 0.50%)
5. What is the exemption Threshold?
₹10 lakh (increased from ₹5 lakh)
6. What is the charge Cap for Orders >₹10 Cr?
₹3 lakh (reduced from ₹72.50 lakh)
7. What is the orders with No Charges?
Nearly 97%
8. What is the geM-LUB MoU Year?
2024
9. What is the oEM Assessment Fee Cut?
66% to 92% (since Jan 2024)
10. What is the current context?
Reforms announced at GeM Samvad 2026 event by GeM CEO Mihir Kumar and LUB officials.
All sources
- Original28 October 2026 · Read story
