Key Points
The Income Tax rule that stops businesses from claiming tax deductions for payments beyond 45 days to MSMEs for supply of goods and services will come into effect on Monday.. According to Section 43B(h) of the Income Tax Act, introduced through Finance Act 2023, if a larger company does not pay an MSME on time -- within 45 days in case of written agreements -- it cannot deduct that expense from its taxable income, leading to potentially higher taxes...
Some industry bodies have urged the government to postpone implementation of the new payment rules, the Federation of Indian Micro and Small & Medium Enterprises (FISME) is of the opinion that the new rule has the potential to be a game-changer for MSMEs...
MSMEs fear that due to this provision, large buyers could cold-shoulder MSME suppliers and start buying either from those MSMEs that are not registered with Udyam or from non-MSMEs...
The industry said Section 43B (h) is a positive step towards a more efficient and fair financial environment for MSMEs as it creates a strong incentive for larger companies to prioritise payments to MSMEs, ultimately benefiting the entire economy...
In its memorandum to the finance ministry, CAIT had welcomed the government's decision, highlighting the significance of ensuring timely payments to the MSME sector within 45 days to maintain uninterrupted cash flow for traders...
