Quick Tip: EMD in auction is the refundable bid security paid before a GeM reverse auction. EMD is not mandatory on every GeM tender. The buyer normally requests it only when the procurement value crosses rupees five lakh. GFR 2017 allows 2 percent to 5 percent of the bid value. [DG1] Many MSMEs registered under Udyam stay exempt entirely.
EMD in auction is one of the items that confuses many MSME sellers participating in a GeM reverse auction. The first question is whether the deposit applies at all. The second is whether the figure changes during the auction. The short answer is no on both counts. The deposit applies only when the buyer asks for it under the rules. When it does apply, the seller pays it at the bid submission stage. The reverse auction comes later and does not change the figure.
This guide explains what EMD in auction means. The article also covers when the deposit applies, the percentage rules, the exemption list and the refund timelines.
What EMD in Auction Means
EMD in auction refers to the earnest money the seller has already paid as part of bid submission. The deposit goes in before the buyer evaluates technical and financial bids. Only the bidders who clear the technical evaluation enter the reverse auction. By the time the auction starts, every participant has either an EMD on record or a valid exemption. The auction is a price competition phase. It does not collect a fresh EMD.
When EMD Is Required : GeM Bid or Reverse Auction?
EMD may not be required when:
● The seller is an eligible Micro, or Small Enterprise registered under Udyam.
● The seller is a Startup registered with the Department for Promotion of Industry and Internal Trade (DPIIT), Government of India as part of Startup India.
● The seller is a Public Sector Undertaking or a government body. However, this varies on a case-to-case basis.
The seller should always check the Additional Terms and Conditions (ATC) section of the bid or reverse auction document on the GeM Portal. The ATC confirms whether the buyer has mandated the EMD for that specific requirement. The bidder should also login to GeM and navigate to the EMD section for the specific bid in the drop down option to check the entities that are exempted from EMD payment.
How the EMD Amount Is Calculated for a GeM Tender
Where the EMD applies, the buyer fixes the figure in the tender document as a percentage of the estimated procurement value. The General Financial Rules 2017 allow the percentage to vary between 2 percent and 5 percent. The buyer may set a higher figure also. The risk profile of the procurement also influences the figure.
For instance, take a fifty lakh rupee procurement at the GeM default of one percent. The formula gives fifty thousand rupees as the EMD. The same tender at three percent would set the deposit at one and a half lakh rupees. The exact figure sits in the bid document or the ATC. The seller calculates against the figure the tender states, not against a self-assumed default.
The buyer also specifies the acceptable instrument. Account Payee Demand Draft drawn on a scheduled bank is the standard route. Bank Guarantee from a scheduled bank for the validity period is the alternative. Some tenders also accept Fixed Deposit Receipt or payment through NEFT/ RTGS. The seller arranges the instrument in advance because it needs to be given on the due date of tender submission. The instrument, in case of instruments such as Bank Guarantee must have a validity for a period specified in the bid, normally 45 days. A short validity instrument gets the bid disqualified at the evaluation stage even where the financial offer is competitive.
Why the EMD Amount in Auction Stays the Same
The EMD amount in auction is the figure the seller paid at submission of the bid. The reverse auction does not change it. A seller who wins the auction at a price lower than the original estimate does not pay a smaller EMD. The deposit was calculated and paid before the auction started. It stays at that figure until the refund or adjustment happens after the award.
This is the most common misunderstanding among new GeM sellers. The reverse auction is a separate phase that does not collect a fresh deposit. The EMD was a compliance check that happened before the bids were even opened.
EMD Validity and Refund Rules on GeM
The EMD on a GeM tender must remain valid for 45 days after the bid validity period. If a larger validity is required, the same is mentioned on the tender document. The seller checks this requirement when arranging a bank guarantee or other instrument. A validity that expires before the buyer completes the evaluation can lead to disqualification.
After the reverse auction ends, the EMD is refunded within 15 days of bid finalisation. This is however, not fixed, as internal processes within the tendering authority impact this. Unsuccessful bidders receive the money back through the same instrument used for payment. The winning bidder's EMD is either adjusted against the security deposit for the contract or refunded after the agreement is executed. No interest is paid on the EMD during the period it sits with the buyer.
When the EMD on a Reverse Auction Is Forfeited
The earnest money deposit (EMD) is forfeited when the bidder fails to honour the commitment made at submission. Five conditions trigger forfeiture on a GeM tender:
● Withdrawing the bid after submission.
● Winning the auction but refusing to sign the contract.
● Failure to start the work on time.
● Failure to submit the performance security after the award.
● Submitting incorrect or false documents during the bid.
Forfeiture protects the buyer from non-serious participation. The seller can avoid it by reading the tender carefully, calculating the floor on their own cost structure. The seller then bids only on contracts the team can actually deliver.
Where ClearBid Surfaces the EMD Before the Auction
ClearBid's tender analysis reads the uploaded GeM tender and creates a structured tender summary. The summary surfaces the EMD amount, the percentage, the accepted instruments, the validity period, the submission deadline. For a Micro or Small Enterprise with an Udyam registration, the eligibility check feature in ClearBid flags whether the exemption applies by comparing the requirements in the GeM document against the profile of the MSE created in ClearBid. The seller continues to handle the payment and the GeM portal interaction directly.
Conclusion
EMD in auction applies only when the GeM tender crosses rupees five lakh and the buyer has chosen to include the requirement. The acceptable range under GFR 2017 is 2 to 5 percent. Many sellers are exempt. MSEs (Medium enterprises are not exempt) registered under Udyam, Startups registered under DPIITfall in this list. The reverse auction does not change the figure once it has been paid. The seller reads the ATC section of the bid document to confirm what applies on each tender.
For an MSME bidding on GeM regularly, register today on ClearBid to upload your next GeM tender. The deposit clause, the percentage, the exemption applicability appear in a structured tender summary within minutes.
Frequently Asked Questions
Q1. What is EMD in auction on a GeM tender?
EMD in auction is the refundable deposit the seller paid at the bid submission stage where the buyer required it. It applies only on GeM tenders exceeding rupees five lakh and only when the buyer has included the requirement in the bid document. The reverse auction happens later and does not collect a fresh deposit.
Q2. What is EMD amount in auction and does it change during reverse bidding?
The EMD amount in auction is the figure the seller paid at submission. The amount does not change during the reverse auction. A seller who wins at a lower price does not pay a smaller deposit. The amount stays the same until the refund or adjustment after the contract is awarded.
Q3. How does the earnest money deposit work alongside the EMD in auction phase of a GeM bid?
The earnest money deposit is paid before bid submission. After the buyer opens technical bids, only qualified bidders enter the reverse auction. The deposit is already with the buyer at this point. It is refunded within 15 days of bid finalisation or adjusted against the performance security for the winner.
Q4. When can an MSE skip the EMD in auction entirely before entering reverse bidding on GeM?
An MSE with an Udyam registration can skip the EMD in auction where the tender allows the exemption. Startups registered under DPIIT, BIS licence holders, PSUs are also exempt. MSEs with registration with KVIC, Coir Board, TRIFED, Kendriya Bhandar are also sometimes exempt. If exempt , the seller enters the reverse auction without the deposit having been paid.
Q5. What happens to the EMD in auction if a bidder withdraws during the reverse auction?
The EMD in auction is forfeited if a bidder withdraws after submission or refuses to honour the contract after winning. The buyer keeps the deposit to compensate for the broken commitment. This rule discourages non-serious participation in the reverse auction and in the tender process overall.
Q6. How long does it take to refund the EMD in auction after the GeM reverse auction ends?
Unsuccessful bidders receive the EMD in auction refund within 15 days of bid finalisation through the same instrument used at payment. The winning bidder's EMD is adjusted against the performance security or refunded after the agreement is executed. No interest is paid on the deposit during this period.
Q7. How does ClearBid show the EMD in auction details before bid prep starts?
ClearBid's tender analysis reads an uploaded GeM tender and surfaces the EMD in auction details inside a structured tender summary. The summary includes the percentage, the accepted instrument, the validity period, the submission deadline. The eligibility check flags whether the MSE exemption applies against the saved Udyam profile.
