The Centre wishes to reconsider the 45-day payment rule for micro, small, and medium enterprises if the industry wants it, Finance Minister Nirmala Sitharaman cited.
The Finance Minister cited that when MSMEs need an extended payment duration then they could provide the representations for the acknowledgement in the forthcoming budget in July.
The minister in an interaction with MSMEs in Ludhiana, ensured that the relief of tax for such companies remains accessible. She underscored that the same relief is possible on timely payments, ensuring that the advantage of businesses while complying with the current payment has been scheduled.
Sitharaman said, that if MSMEs and the industry deem they don’t want this modification and will sort it amongst themselves, and desire this route to be modified, then do submit representations, and absolutely in the July budget, we will perform for the same concern.
Under Section 43B(h) of the Income Tax Act, introduced through Finance Act 2023, if a larger company does not file an MSME on the said time i.e within 45 days in case of written agreements then it cannot deduct that expense from its taxable income, directing to higher taxes.
The government has pleaded with certain industry bodies to postpone enactment of the new payment regulations, the Federation of Indian Micro and Small & Medium Enterprises (FISME) believes that the new rule has the prospect to be a game-changer for MSMEs.
Because of the identical provision MSMEs fear that the large buyers can cold-shoulder MSME suppliers and begin buying either from those MSMEs that are not registered with Udyam or from non-MSMEs. Admitting that Section 43B(h) has yielded some uncertainties among both MSMEs and larger businesses, FISME expressed, “Such fears are baseless”.
As per the industry body, it is an improper conclusion to draw that substituting dependable suppliers is solely due to the large company not wishing to pay them on time. In any event, in poor circumstances, the tax filed over these delays could be adjusted the following year when the company pays the supplier. The same does infuse discipline in commercial measures.
