Posted By Dhruv | Feb 14, 2025 | GeM Tender
The Government e-Marketplace (GeM) is a revolutionary online platform designed to facilitate seamless procurement for government organizations, public sector units, and other registered entities. To maintain transparency and credibility in transactions, GeM has implemented various financial security measures, one of which is Caution Money. This articles delves into the concept of Caution Money in GeM, its significance, registration requirements, and impact on sellers.
Caution money in GeM refers to the security deposit that sellers must submit while registering on the GeM portals. This amount acts as a safeguard to ensure compliance with GeM policies and prevents fraudulent activities. Unlike a participation fee, caution money is a one-time refundable deposit that sellers provide to verify their credibility and seriousness in conducting business through the platform.
The introduction of caution money aims to deter non-serious vendors from misusing the platform, ensuring that only genuine and committed businesses participate in the GeM portals procurement process. The caution money also adds a layer of financial security, which benefits both buyers and the platform itself.
The inclusion of caution money in GeM serves multiple essential purposes:
The GeM portal facilitates large-scale procurement, making it crucial to prevent fraudulent activities. The caution money deposit ensures that only bona fide sellers register, reducing the chances of fake bids and fraudulent transactions.
By requiring caution money, GeM ensures that sellers have a genuine interest in conducting business and fulfilling orders. It filters out non-serious vendors, enhancing the overall efficiency of the procurement system.
Government buyers prefer transacting with credible and verified vendors. Caution money serves as an assurance that the seller is committed to delivering quality goods and services.
Caution money aligns with the government's efforts to establish a transparent and accountable e-procurement process. It encourages fair trade practices and holds sellers accountable for their commitments.
Sellers who wish to register on the GeM portal must deposit caution money as part of the GeM registration process. The amount varies based on the size and category of the business. Below is a general breakdown of caution money requirements:
Business Category | Annual Turnover | Caution Money Deposit |
|---|---|---|
Small Sellers (MSMEs/Startups) | Up to ?1 Crore | ?5,000 |
Medium-Sized Enterprises | ?1 Crore - ?10 Crore | ?10,000 |
Large Enterprises | Above ?10 Crore | ?25,000 |
Register on GeM – Sellers must create an account on the GeM portal by providing business details, GSTIN, PAN, and bank account information.
Submit Business Documents – MSMEs and Startups must provide relevant registration certificates, while large businesses must verify their credentials.
Pay Caution Money – Based on the business turnover, sellers need to deposit caution money via an online payment gateway available on GeM.
Verification and Approval – After payment, the GeM authorities verify the seller details. Upon successful verification, the seller profile is activated.
One of the key concerns for sellers is whether they can claim a refund of their caution money. The refund policy for caution money in GeM states that:
Caution money is non-refundable during active registration on GeM.
If a seller decides to deregister, they can apply for a refund.
The refund process is initiated only after verification of pending dues and order fulfillment compliance.
Refunds are processed to the seller’s registered bank account.
To request a refund, sellers must log into their GeM account, navigate to the refund section, and submit a formal request for deactivation along with banking details.
While caution money helps maintain credibility, it also impacts sellers in various ways:
Since sellers must invest a refundable amount, only committed vendors participate in bidding, leading to a more competitive and reliable marketplace.
Micro and small businesses may find it challenging to pay caution money, particularly startups with limited capital. However, GeM offers a lower deposit amount for MSMEs to support small entrepreneurs.
Caution money boosts the reputation of the GeM portal, making it a trusted marketplace for government procurement. This ensures that only quality vendors are part of the ecosystem.
Yes, all sellers registering on GeM must deposit caution money. However, government departments and organizations do not require this deposit.
No, caution money is refundable only upon deregistration from GeM and after clearance of pending obligations.
MSMEs and startups have to pay caution money, but they benefit from a lower deposit requirement compared to large enterprises.
No, caution money is not used as a penalty. Sellers violating GeM policies may face additional penalties, suspension, or blacklisting.
Sellers can view their caution money deposit and refund status through their GeM dashboard under the financial transactions section.
The GeM procurement system requires caution money to sustain transparency as well as credibility along with accountability across the procurement environment. The system serves both as a protection mechanism for those responsible for public procurement and an ethical practice compliance system for potential vendors. Knowledge about the complexities of GeM caution funds enables businesses to perform effective GeM registration while meeting government procurement requirements.
Understanding the rules about caution money has become a necessary part for sellers who want to succeed on GeM Marketplace during both their initial registration steps and their lasting operations. Businesses interested in registering on GeM need to verify fulfillment of both their financial and compliance standards to prevent any delay or difficulty during the process.
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