The government is actively reviewing the concerns of stakeholders and assessing whether there are valid grounds for amendments to this 45-days payment rule for MSMEs.
45-days Payment Rule for MSMEs: The Finance Ministry is contemplating a revision to a recent tax regulation requiring businesses to settle payments to small and medium-sized enterprises (MSMEs) within 45 days.
There is a growing chorus among businesses for a later initiation of this rule or an extension of the payment period beyond the existing 45 days. Those advocating for a change argue that more time is needed for payments to be made smoothly.
A source familiar with the matter revealed that the government is actively reviewing these requests, assessing whether there are valid grounds for amendments. The new rule is slated to take effect on April 1, 2024, yet some are proposing a deferment to April 1, 2025.
The concerns prompting these calls for adjustment are varied. MSMEs, particularly in sectors such as textiles, fear that the regulation could strain their relationships with buyers and sellers who often operate on credit terms. Additionally, there are apprehensions about the readiness of systems to adapt to this new requirement.
In a bid to incentivize timely payments to small businesses, a new clause (h) in section 43B of the Income Tax Act mandates that businesses settle dues with small or micro-enterprises promptly. Any payment made beyond the stipulated period of 45 days, as per section 15 of the MSME Development Act 2006, will only qualify for deduction upon actual payment. Failure to comply within the specified timeframe could subject the buyer to taxation on the payment.
A recent plea from a trade association urged the finance minister to postpone the implementation of this rule until there is a comprehensive understanding across the board. They propose shifting the effective date to April 1, 2025, citing potential advantages for small businesses who might otherwise face tough competition from larger corporations.
Stay tuned for updates on this evolving situation as the Finance Ministry navigates the concerns raised by various stakeholders in the business landscape.
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This website is phenomenal. The radiant material shows the proprietor’s enthusiasm. I’m dumbfounded and envision more such mind blowing entries.
Firstly does Government make payments to MSME within 45 days..their payments are pending since years…Why it should not be implemented to Government purchases too…
Why so much hue and cry. There should not be any changes in the provision. Rather government must also make payment to MSME in time and failing which strict action should be taken against defaulting officers. Overdue Interest should be realised from their salaries.
The provision to claim interest on delayed payment from govt will be a progressive step in govt private participation for any project. This will reduce the power of the concerned officials pressing for bribery. The 45-day provision is correct for all buyers and needs no change.
100% correct question. If government don’t have accountability and compliance to make payment as per rules, how can this new rule, though very much in need, be implemented?
Its a good ploy that msme units get payment in time…but most highlighting point is most outstanding payments and late payments to msme are of government supply. Why Government does not clear msme invoices within 45 days
It can be postponed to next financial year
It should be from next year
I would say it’s a very good move..
This will help all the msme and small companies a lot ,as most of the big companies take advantage of the small companies and delay the payment Beyond the agreed payment term..and they can do nothing about it.
Honestly never ever thought someone would come up with such a great idea.
45 days to Change Minimum 90 days and All Category Same No micro small medium enterprises
इस 45 दिन के नियम को 90 दिन तक का प्रस्ताव में रखता हूं। कारण पोपलीन माल के प्रोसेस में कम से कम 60 दिन लगाते हैं। यह हेन्ड प्रोसेस एवं प्रकृति एवं मजदूरो पर निर्भर है।
Should be exempted for Textile and Readymade Industries
Such rule will kill all small and micro companies of textile sector. Textile sector has been running on credit based ranging from 30 days to 90 days since the inception of the trade .over night change to 45 days payment prompted many buyers already shut their doors to the MSME instantly and starting return their supplied goods as well , on the other hand fearing the eminent drop in their turn over decide to take a fresh RC without MSME . This rule may pave way for un imaginable mode of trade activities among traders ….. The finance ministry should take wise decision else witness total turmoil of textile trade
The intention of govt is right but the way of implementing is wrong. Half hearted measures never succeed. To move a cycle smoothly u need to chain it properly.. Unless small traders and wholesalers will get their payment from retailers in 45 days time frame ,how will they make payment to their suppliers and manufacturers in 45 days. So traders should be included in this cycle and the time period should be fixed for 75-90 days..
I am 100% in your support.
Govt did’nt think about exporters who received payment from foreign buyers in 90 to 120 days DA or LC and then how they can pay to local supplier within 45 days until unless they have the payment in account.
So this is not practical from exporters point of view and Got has to rethink about this new rule and exepmt or give some relaxations to export concerns.