Are you planning to sell on the Government e-Marketplace? Understanding caution money in GeM is your first crucial step. This security deposit is required from all sellers before they can start listing their products or services on the platform.
For many first-time sellers, this mandatory payment raises several questions. How much do you need to pay? Is caution money in GeM refundable? The answer depends on your business size. For small businesses with turnover less than ₹1 crore, the caution money deposit in GeM is ₹5,000. However, medium-sized enterprises with turnover between ₹1 crore and ₹10 crores must pay ₹10,000, while large businesses with turnover exceeding ₹10 crores need to deposit ₹25,000 [-5].
In this guide, we’ll walk you through everything you need to know about caution money in the GeM portal, from payment procedures to refund policies. We’ll also share practical tips to help you navigate this requirement smoothly as a first-time seller.
Getting Started: Who Needs to Pay Caution Money?
The Government e-Marketplace (GeM) introduced caution money to ensure authenticity and maintain discipline among sellers on the platform. First and foremost, let’s understand who needs to pay this security deposit and what happens if you don’t comply with this requirement.
Is caution money in GeM mandatory for all sellers?
Yes, caution money in GeM is mandatory for most sellers. Since January 1, 2021, GeM has made it compulsory for sellers to submit caution money before they can fully utilize the platform. This one-time security deposit serves as a safeguard against fraudulent activities and ensures only genuine businesses participate in government procurement.
What happens if you skip this payment? The consequences are significant. Without depositing caution money, you won’t be able to:
- Upload new brands or products
- Participate in any new bids
- Receive any new orders (DP/L1/BID/RA)
- Make it to any listings on the portal
- Conduct direct purchases
In fact, your GeM account could eventually be disabled if you fail to comply. The platform has implemented this measure specifically to filter out vendors who list products at unrealistically low prices, which previously prevented legitimate sellers from competing effectively.
The amount of caution money depends on your business’s annual turnover:
- For sellers with turnover less than ₹1 Crore: ₹2,000
- For sellers with turnover between ₹1 Crore and ₹10 Crores: ₹10,000
- For sellers with turnover more than ₹10 Crores: ₹25,000
Exemptions and special cases for MSMEs and startups
Despite the mandatory nature of caution money, GeM has created special provisions for certain seller categories. According to official GeM guidelines, the following categories are completely exempted from paying caution money:
- Self-Help Groups (SHGs)
- Artisans
- Weavers
- MSE Women entrepreneurs
- MSEs owned by SC/ST entrepreneurs
- Farmer Producer Organizations (FPOs)
- One District One Product (ODOP) sellers (on Nodal request)
Additionally, firms recognized as ‘Startups’ by the Department for Promotion of Industry and Internal Trade (DPIIT) are also exempted from this requirement. This exemption aims to reduce financial barriers for emerging businesses and encourage their participation on the platform.
For other MSMEs and small enterprises that don’t fall under these specific exemption categories, caution money is still required. Nevertheless, the tiered payment structure ensures smaller businesses pay proportionately less compared to larger enterprises.
Once paid, this amount remains at the disposal of GeM SPV (Special Purpose Vehicle). In case of penalties due to failed deliveries, damaged products, or other contract violations, deductions will be made from this deposit. Therefore, maintaining good business practices is essential to avoid forfeiture of your caution money.
How to Pay Caution Money in GeM Portal
Depositing caution money in GeM requires a few simple steps that first-time sellers should follow carefully. Let me walk you through the complete process to ensure your payment goes through smoothly.
Navigating the GeM dashboard
Once you’ve logged into your GeM seller account, locate the dashboard section. Look for the “Manage Caution Money Account” option. Initially, this might not appear highlighted. If that’s the case, click on “Recalculate Threshold Limit” first.
After clicking on the caution money management option, you’ll be redirected to the “Add Account” page where you need to select a bank for your virtual account. Currently, you can choose between Axis Bank and ICICI Bank. Remember, once you select a bank and submit, you cannot change it later.
Choosing payment options (NEFT, UPI, etc.)
After creating your virtual account, you’ll have several payment options:
- Online bank transfers: Make payments via NEFT or RTGS to your virtual account
- Credit/debit cards: Secure payment option available for some banks
- UPI: Quick transfer option similar to using PhonePe or Google Pay
- Direct payment: If you selected Axis Bank, you may have the option for direct payment through internet banking
For NEFT/RTGS transfers, note down the account number and IFSC code provided on your screen. Subsequently, make the transfer before 6:00 PM for faster processing. It typically takes 24-48 hours for your caution money balance to reflect in your GeM account.
Tips to avoid transaction errors
To prevent payment issues:
- Double-check the account details before transferring funds
- Ensure you transfer the exact amount required based on your turnover bracket
- Keep transaction receipts for reference until your balance shows updated
- After payment, click “Update Balance” to refresh your account status
Remember that once deposited, the caution money cannot be withdrawn back. Visit TenderShark.com for expert guidance on GeM portal payments and processes if you encounter any difficulties during this process.
Understanding Refunds and Policy Updates
Many sellers wonder about the fate of their caution money after they’ve established themselves on the GeM platform. Let’s clarify the refund policies and how to stay informed about important updates.
Conditions for refund eligibility
The caution money in GeM serves as a security deposit that remains with the platform throughout your active seller status. Important to realize, this amount is non-refundable during active registration. You can only request a refund when you decide to completely deregister from the GeM portal.
Furthermore, the refund process isn’t automatic. GeM initiates refunds only after verifying:
- No pending dues exist in your account
- All order fulfillment obligations have been met
- Your compliance history is satisfactory
To request a refund, you must log into your GeM account and navigate to the refund section. At the same time, you’ll need to submit a formal deactivation request along with your banking details.
How long does the refund take?
Once your account closure is processed and approved, the refund timeline typically ranges between 30-60 days. The amount will be credited directly to your registered bank account. In order to check your refund status, look under “Account Balance and Status” in your caution money account section.
In contrast to the straightforward deposit process, refunds sometimes face delays. As a result, if you don’t receive your refund within the expected timeframe, follow up through the GeM helpdesk.
Staying updated with GeM policy changes
Policy changes regarding caution money can occur periodically. To be sure you’re working with current information, make it a habit to regularly check the official GeM website for updates. The rules and deposit amounts may shift based on market feedback and platform requirements.
The caution money system ultimately benefits the GeM ecosystem by maintaining its integrity. This security mechanism ensures that only genuine businesses participate in government procurement, creating a transparent and fair marketplace for all sellers.
Impact on First-Time Sellers and How to Prepare
For first-time sellers on GeM, caution money represents more than just a mandatory deposit—it’s a crucial business consideration that requires proper planning. Understanding its full impact on your operations can make the difference between success and setbacks on the platform.
Financial planning for small businesses
First and foremost, budgeting for caution money should be part of your GeM entry strategy. The tiered structure means smaller businesses pay less, but it can still create financial pressure for startups and micro-enterprises. Based on your annual turnover, you’ll need to set aside:
- Less than ₹1 crore: ₹5,000
- Between ₹1 crore and ₹10 crores: ₹10,000
- More than ₹10 crores: ₹25,000
Moreover, this isn’t your only financial commitment. Once caution money is paid, there’s an additional vendor assessment fee ranging from ₹871.61 to ₹3,486.44 depending on your turnover bracket. Although this may seem burdensome, depositing caution money actually increases your credibility with government buyers.
Vendor assessment after caution money deposit
Naturally, after paying caution money, vendor assessment becomes your next crucial step. This process is mandatory, especially for sellers of Q1 and Q2 category products. Manufacturers must complete this assessment to become OEMs on the platform, regardless of product category.
The assessment process includes:
- Login with your provided user ID and password
- Complete desktop assessment
- Submit all required documentation
- Undergo inventory verification
This assessment must be completed within 30 days. Visit TenderShark.com for expert guidance on GeM portal payments and processes if you encounter difficulties during this stage.
How to avoid penalties and forfeiture
Above all, understanding when caution money can be forfeited is essential. Your deposit may be partially or fully taken if you:
- Fail to execute a contract or meet obligations
- Withdraw a bid during its validity period
- Fail to furnish required performance security
Consequently, when your caution money falls below the threshold after deductions, your seller account is put on hold until you replenish it. Your inventory becomes inaccessible across all categories until you top up the required amount.
Regular compliance checks and ensuring timely deliveries will safeguard your deposit while building a positive reputation on the platform.
Conclusion
Caution money serves as a critical first step for anyone looking to sell on the Government e-Marketplace. Throughout this guide, we’ve explored how this security deposit works as a safeguard against fraudulent activities while ensuring only genuine businesses participate in government procurement. Therefore, understanding and planning for this requirement becomes essential for your success on the platform.
As we’ve seen, the deposit amount varies according to your business size—₹5,000 for small businesses with turnover below ₹1 crore, ₹10,000 for medium enterprises, and ₹25,000 for larger companies. Additionally, certain categories like Self-Help Groups, artisans, and DPIIT-recognized startups enjoy complete exemption from this requirement.
Remember that caution money remains with GeM throughout your active seller status and becomes refundable only when you deregister from the platform. Consequently, maintaining good business practices is crucial to avoid penalties that might reduce your deposit below the threshold limit, which could put your seller account on hold.
For first-time sellers, budgeting for this deposit alongside the vendor assessment fee should be part of your entry strategy. Despite seeming like an additional financial burden, this system ultimately enhances your credibility with government buyers and helps create a transparent marketplace for all participants. Visit TenderShark.com for expert guidance on GeM portal payments and processes if you need assistance navigating these requirements.
After completing your caution money payment and vendor assessment, you’ll be ready to unlock the full potential of the GeM platform. Though initially challenging, these steps help establish your business as a trustworthy government supplier—opening doors to numerous procurement opportunities across India.
FAQs
Q1. What is caution money in GeM and why is it required?
Caution money in GeM is a security deposit that sellers must pay before they can start listing products or services on the platform. It serves as a safeguard against fraudulent activities and ensures only genuine businesses participate in government procurement.
Q2. How much caution money do I need to pay as a seller on GeM?
The amount of caution money depends on your business’s annual turnover. For sellers with turnover less than ₹1 Crore, it’s ₹5,000. For those with turnover between ₹1 Crore and ₹10 Crores, it’s ₹10,000. Businesses with turnover exceeding ₹10 Crores need to deposit ₹25,000.
Q3. Are there any exemptions from paying caution money on GeM?
Yes, certain categories are exempt from paying caution money. These include Self-Help Groups, artisans, weavers, MSE women entrepreneurs, MSEs owned by SC/ST entrepreneurs, Farmer Producer Organizations, and startups recognized by DPIIT.
Q4. How can I pay the caution money on GeM?
You can pay caution money through various methods including online bank transfers (NEFT/RTGS), credit/debit cards, UPI, or direct payment through internet banking for some banks. The process involves creating a virtual account on the GeM portal and then making the payment.
Q5. Is the caution money refundable, and if so, when?
Caution money is refundable, but only when you completely deregister from the GeM portal. The refund process typically takes 30-60 days after account closure is approved, provided there are no pending dues or unfulfilled obligations.
