Key Points
TP Ostwal highlights the risks of delayed payments to MSMEs, urging timely settlements within 45 days to avoid disallowances and hefty tax penalties..
Now the question arises if you have still made the payment to that MSME prior to the year end with no disallowances in your hands, it will be allowed...
If you have not cleared the payment before the year end, that 45 days are over and still not clear, this disallowance under the Income Tax Act gets triggered for the person who has purchased something from MSME..
But in the case of MSME, this disallowance, before filing tax return even if you have paid, it will not be allowed, it will be still disallowed and this will be allowed in the next year which is an exception to the normal rule which they have created for all other statutory payments and therefore to that extent is more draconian...
I would take a view that if the interest liability is already provided, which is penal in nature, why should there be a disallowance if the taxpayer makes the payment before filing his tax return to the MSME and therefore, I would take a view that this is a good provision introduced with a view to protect the interest of MSME, but the hiccups created to the payer because suppose you are creating such a provision in the law, people instead of buying from MSMEs, will find alternate sources like an unregistered MSME or a large supplier because then there is no question of disallowance of my payment and additional tax of 35% on me.. (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets..
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