The government of India in a measure to support the financial health of micro, small, and medium enterprises (MSMEs) in India, announced the enactment of a strict rule requiring payments to MSMEs to be settled within 45 days. Tax penalties on the due amount shall be levied if companies fail to follow the said rule.
As per two senior finance ministry officials, any revision to such a rule can only happen at the time of the Union Budget in July, highlighting the government’s firm stance on the case. Section 43B (h) in the Income Tax Act introduced by the Finance Act 2023, mandates timely payments to MSMEs to sustain uninterrupted cash flow and strengthen economic sustainability.
One senior finance ministry official mentioned that “Companies need to make payments to the MSME sector within 45 days, as per the Finance Act 2023, effective from April 1, 2024. Failure to adhere to this timeline will render companies ineligible to claim deductions, with the overdue amount subjected to taxation.”
Parliament had already approved the amendment showing an important transference in tax compliance norms, dictating that deductions for tax, duty, cess, or fees liable to be paid to the government can just be claimed on the actual payment, no matter when they were accrued or incurred.
Explaining the cause for the revision, a second finance ministry official stressed its role in ensuring prompt tax compliance, declaring, “The provision underscores the imperative for businesses to fulfil their tax obligations promptly, discouraging the practice of indefinitely deferring payments for tax benefits.”
Measures to postpone or change the rule prior next budget session in July are considered inappropriate since any revision should experience parliamentary scrutiny and approval. The Confederation of All India Traders (CAIT) urged a one-year postponement of the rule, quoting ambiguities and demanding attention among traders all across the country.
MSMEs have struggled with late payments from both public and private entities, resulting in challenges to their functional viability. The importance of timely payments is been stressed by Finance Minister Nirmala Sitharaman specifically during the rise of the pandemic, highlighting the commitment of the government to assist the MSMEs.
Diverse opinions for the amendment have been expressed by the Industry stakeholders. Considering its impact on business functioning, some regard it as a measure to strengthen MSMEs’ financial stability. Others highlight the demand for improved access to finance for buyers to promote timely payments to MSME suppliers.
The government to handle payment delays, has executed efforts like the Trade Receivables Discounting System (TReDS), easing prompt receivables for MSMEs by enabling the discounting of their invoices. The TReDS platform acts as a critical process for MSMEs to access timely funds, assuring their constant growth and viability in the evolving market trend.
Whether, contractual obligation liabilities like security deposit, performance bank guarantee related retentions are covered under 45 days rule?
will the new rule apply for transaction taking place between msme to msme ?
I m reliable person. I do my business are per terms and conditions proper with billings . I m fully a tax payer. I will also pay gst everymonth within time. I have not that big business. Manufacture give us credit and we also give credit into market the whole rotation is going on. What about them who truthfully pay u every tax. Cut there life at right scale. Just bcoz of some persons u target the whole industry. Its better to make strong rule for the late payees or the person who hold our payment eaten our payment. They will also return their chq promisery payment. Bcoz govt cannot taking any strict action for this make this rule strong.. rather than suffer common peoples.. madam finance minuster u dnt knw how middle class people lives their lifes how they survive for their family . Respect food of two times.. such a bad decision by you .. sorry.. i dn support.all the gst holders’ creditors and debtors for all them this rule should be implied. For example I am a trader and i supply to retailers , and i take goods from maunfactures and manufactures give 90 days credit and i give retailers 4 month credit! After this rule the retailers are not going to give payment now becuz I am a tarder and I have to give manufacturers becuz they are under msme! So how do I play them without getting money?!! Government should make rules for everyone! So that turn condition 30 days 60 days or 45 days! It should apply for all creditors and debtors
Respected Sir,
It is in the interest of entire nation .We need things to be in organised manner. So take it positively , you will receive within 45 days and you will pay within 45 days . thanks
DEAR SIR need a bit guidance i have purchase of good from my supplier who r registered under MSME . ihad purchased in the month of nov december january feb 2023-2024. thus this rule is effective from 01-01-2024 (means the purchase that i do from 2024 st April i will have to pay in 15/45 days as per term) /i just want to know whether the purchase of 2023 till 31st march 2024 also i will have to clear
I m reliable person. I do my business are per terms and conditions proper with billings . I m fully a tax payer. I will also pay gst everymonth within time. I have not that big business. Manufacture give us credit and we also give credit into market the whole rotation is going on. What about them who truthfully pay u every tax. Cut there life at right scale. Just bcoz of some persons u target the whole industry. Its better to make strong rule for the late payees or the person who hold our payment eaten our payment. They will also return their chq promisery payment. Bcoz govt cannot taking any strict action for this make this rule strong.. rather than suffer common peoples.. madam finance minuster u dnt knw how middle class people lives their lifes how they survive for their family . Respect food of two times.. such a bad decision by you .. sorry.. i dn support..
trader par goverment kuch rules change kare,pls add to MSME ACT trader to add kare goverment.
Government ko aaj raat middle class vayapari ke hit ko dhyan mein rakh kar is rule ek saal extend karna chahiye .kal se a achar sahinta lag jayegi government koi disseason nahi le payegi. Vayapari paisa kahan se denge ek dum.is se vote bank ko jhaktka lag sakta hai sarkar ko.
Trader ko including kare MSME mai sir, nahi tho Trader ko time parpayment nahi melega
Please advise 1st april 2024 compulsory for all invoice msme number update . provide incometax act section number
Here is the big comedy. The sufferer is MSMEs but government will levy tax and enjoy free income. So how will it help the industry
What will happen when parties delay orders , late 3 months , or send defective goods
While government has put this rule in place for private sector.
Why is this not implemented for the state & centeral government sector/psu purchase .
These are some of the biggest purchasers in the country, the red tape & corruption in these sectors is infamous.
These sectors are also not affected by this rule.
Even though the finance minister have put the order some private limited company don’t pay the payment even after 75days of time but we small msme don’t get support from financial institutions and GST department to pay monthly returns only the lord above us should help us to survive. Only the big limited company’s grow but we suffer
People still not interested to pay. They say once tax will levied we will pay to parties in next financial year.payments will go more delayed.i have outstanding from 2020 how can i get that.Best way to enhance period to 120 days and block parties gst no. Till old dues not clear and rule should be for everyone either micro. Small and big industry’s
The article need to clear that the rule is effective from Fin year 23-24 . And need to check Medium MSME. The rule said only for Micro and small Manufacturers & Service providers payments have to made in 15 days ( if no agreement) else within 45 days ( with agreement) .
Date of actual delivery is the 1st day.
Anyways pls read the rule and consult your CA for authentication.
Your article.is misleading.The amendment is applicable for assessment years beginning 1st April 2024 meaning financial year 2023-2024.Please correct.
Your headline is misleading. It is not the MSMEs but the clients of MSMEs have to follow the new rules.
The problem which is arising now is some Retailers are asking to withdraw from MSME or they will not do any business from us i.e. those having MSME.
This 45 day payment schedule should be levied on everyone whether it be in MSME or not.
Because some of them are saying to make a new business firm without MSME registration and supply goods from that firm.
Instead of getting timely payment we are losing orders..
What should we do?
Whoever made this rule has very clearly shifted business from smes to large scale units.
Only large scale units can offer credit and they have qty purchase and also access to cheap public funds
Follow the most bizzare FM who doesn’t eat onions but can pass the union’s budget without thinking the ways India functions..
Meme 2025 new notification
We are also on of msme unite some traders who are not paying us our dues in time to us how can we rotate our funds to pay with in 45 days to msmes.
Hi,
Rajendra ji,
I am facing the same issue, what i think is we should not worry this is the best decision for future. Traders or any other big or small companies who are not paying will be eliminated in coming time and we will have a clear vision to whom we should work with in near future. Although it will certainly creates a huge pressure on profit margin due to fast payment cycle so we should be much focused on how to reduce our manufacturing or purchasing cost in near time.
Consider invoice factoring, where you sell your accounts receivable to a third party at a discount. This provides you with immediate cash but comes at a cost.
Iam facing the same issue company not paid 12 months outstanding bills
We are very difficult to handal the issue
Thanks to govt
What is the use if this act?
Who is it going to benefit?!
The small manufactures are losing their customers and the traders are under debt as they are not receiving money from the retailers but are told to pay with a limited time
For whom is this law made?
What good is it going to do!?
Why are the people above 50 ve turnover not included?
This is act is just helping the rich get richer and the poor get poorer!
It should be withdrawn
Don’t Worry , now own words they will pay you within 45 days so that you will be able to pay others within 45 days , send them your udyam certificate with bill.
I have opened my cloth store in2019, and faced lock-down for 4 months and pay huge salaries to our staff and after 2 year , our creditors settled within 6-7 months and with a credit limit of 1 crore. . Fm. Mam please tell how can I pay
Same problem faced by lakhs of traders. Be open to new reality and restart.