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New Rule of Payment to MSMEs Causes Uncertainty in Textile Markets

Textile Market Selling Graph is Falling Due to New MSME Payment Rule

A new regulation for the assessment year 2024-25 has been enforced by the central government, mandating that purchasers settle payments for goods procured from MSMEs within 45 days of delivery.

Furthermore, all outstanding dues to MSMEs must be cleared before March 31, 2024. Failure to adhere to these timelines will result in the pending payment being treated as income, subject to taxation.

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  • The Kerala Textile and Garments Dealers Welfare Association (KTGDA) has urged MSEs operating in the textile industry to alter their MSME classification from “manufacturing” to “trading” immediately. The reason behind this request is the implementation of a new clause in the Income Tax Act, which mandates businesses to make payments to their suppliers within 45 days, under section 43B(h).

While the government aims to safeguard the Ministry of Micro, Small, and Medium Enterprises (MSMEs), this initiative has introduced uncertainty in the market, leading to the cancellation of orders in Ahmedabad’s textile markets.

The impact is also felt among chemical traders, with some buyers opting to postpone their purchases until after February 16 to ensure that their payment deadlines extend beyond March 31. The textile value chain, accustomed to a credit period of up to 120 days, is particularly affected by this rule.

Gaurang Bhagat, the president of Maskati Cloth Market Mahajan, stated, “We plan to convene a meeting of all associations to address the challenges arising from this regulation. Numerous order cancellations are currently being observed.”

Bharat Chhajer, the former chairman of the Powerloom Development and Export Promotion Council (PDEXCIL), commented, “Although the intention behind the move is to assist MSME units, the immediate response is quite different. In the textile industry, where the standard credit period is 120 days, adhering to a 45-day payment window for MSMEs is challenging and impractical.

Many traders have already cancelled recent orders, and several have refrained from purchasing goods from MSME manufacturers until at least Feb 16, ensuring that their payments fall due in the next financial year. These matters require clarification.”

Karim Lakhani, a chartered accountant, remarked, “New acquisitions have declined since the introduction of the rule. Customers are now turning to larger and medium-sized units. Given that many businesses operate on credit periods of up to 120 days, numerous enterprises have cancelled orders.”

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Nilesh Damani, secretary of the Gujarat Dyestuffs Manufacturers’ Association (GDMA), mentioned, “In the chemical industry, the typical credit period is around 60 days, but due to low demand, this period is often extended. With the implementation of the new rule, many buyers are inquiring whether sellers are registered as MSMEs or not.”

Disclaimer:- "All the information given is from credible and authentic resources and has been published after moderation. Any change in detail or information other than fact must be considered a human error. The blog we write is to provide updated information. You can raise any query on matters related to blog content. Also, note that we don’t provide any type of consultancy so we are sorry for being unable to reply to consultancy queries. Also, we do mention that our replies are solely on a practical basis and we advise you to cross verify with professional authorities for a fact check."

Published by Arpit Kulshrestha
Arpit Kulshrestha seeks higher interests in financial services, taxation, GST, I-T, etc. Writes articles with depth knowledge and is extensive for the same. The resources provide effective articles for the products of SAG infotech which provides taxation and IT software. Writing from observations and researching makes his articles virtuous. View more posts
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23 thoughts on "New Rule of Payment to MSMEs Causes Uncertainty in Textile Markets"

  1. In textile,45days payment pattern not possible, it is not growing to business,no one to come textile business,90 days payment are ok

  2. this rule is not acceptable at all it is difficult to clear payments within 45 days such rules will again lead to slow down the market lot of pending orders are getting cancelled retailers are sending gr

  3. Due to Online business, Note Demonitisation, VAT to GST conversion, Covid , Growing expenses but business distribution due to huge competition in Textile Industry everybody are facing terrible difficulties. So in such times this rule will lead to very high risk for Medium and Small scale business.So extending for 120 to 150 days will be adviseable especially in Textile field.

    1. yes you are right sir already because several other factors like online business retailers across India are facing challenges so in the present scenario it is impossible to do business with such stupid rules

  4. pagalpan hai in this case only large scale investors will survive. think about the midline stream of traders they can not survive .it should be 120days plus days should be given

  5. First of all WHY IS MSME PAYMENT COMPLAIN MADE NOT CLEARED BY THE INSTITUTION . IT HAS TO CREATE CONFIDENCE IN THE SUPPLIER WHO IS GENUINE. There has to be complain office place to place of MSME where the supplier can go and complain if the payment does not come. Its not about in how many days the payment comes its about the secureness of the supplier.

  6. All payments irrespective of Whether MSME or traders or anybody, payment will be cleared within 45 days and extention will be allowed up-to 5 more days in case of emergency. That sounds better to improve Indian Economy value from my point of view

    1. Payment should be 120 days as Textiles market has been most affected since Covid and just now on recovery and new norms are being introduced which is not acceptable at present scenario

  7. textile goods purchased & converted to garment it takes minimum 60 to 75 days in different states than how it is possible 45 days payment. if 45 days payment introduced 10% sale of goods will be sold at 45 days payment.
    As per my view atleast payment of 120 days should be given.

  8. Good law of Msme payment but before selling goods seller party has to clarify payment terms. in textile its possible but in ready made garment manufacturing minimum 120 to 130 days side is must as after purchase and reaching factory and completing mfg of garment it takes 60 to 75 days including transportation and unskilled labour is involved and if msme payment 45 days is introduced 90% of factory, textile shops, mills powerlooms will come to closure and biggest unemployment will be Generated which will create inflation & country will be pushed back several years.

    1. The 45 days payment is good but there many faults in this rule .
      this rule is not implemented on traders means that the trader are only required to pay the money and the customer of traders are paying in 120 days to 2 years also . as per the goverment the traders have too much money that they can clear all the dues of MSMEs in one shot . this rule must requires some amandment either this rule is implented on all the sellers with no return or the time period should be increased to the at leat 70 to 90 days

    1. textile goods purchased & converted to garment it takes minimum 60 to 75 days in different states than how it is possible 45 days payment. if 45 days payment introduced 10% sale of goods will be sold at 45 days payment.
      As per my view atleast payment of 120 days should be given.

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