"Govt May Ease 45-Day Payment Requirement for MSMEs in Upcoming Budget"
2024-07-10 16:23:30
"Govt May Ease 45-Day Payment Requirement for MSMEs in Upcoming Budget"
The government is considering easing the requirement for large buyers to pay Micro, Small, and Medium Enterprises (MSMEs) within 45 days to prevent these buyers from seeking alternative suppliers, according to sources. The announcement could be made in the Budget presentation on July 23. This potential change is in response to suggestions made during pre-Budget consultations, aimed at amending Section 43B(h) of the Income Tax Act.
The clause, introduced in the previous year’s Budget, mandates that if a large company fails to pay an MSME within 45 days, it cannot deduct that expense from its taxable income, potentially leading to higher taxes. While the provision was intended to ensure timely payments to MSMEs, there are concerns that large buyers might avoid doing business with MSMEs registered under Udyam, opting instead for non-registered MSMEs or larger firms.
Sources indicate that MSMEs fear this provision may drive large corporations to shift their sourcing to bigger firms or compel vendors to forfeit their MSME registration to maintain business relations.
In May, Finance Minister Nirmala Sitharaman acknowledged that any changes to this rule would be addressed in the full Budget in July under the new government, based on representations from MSMEs.
The MSME sector is crucial to India’s economy, contributing 30% to the GDP and being the second-largest employer after agriculture. MSMEs also account for 45.56% of the country’s total exports.
