Key Points
Even though micro, small, and medium enterprises (MSMEs) are a key focus area of the Union Budget 2024-25, a section of the industry was left disappointed as it did not review the 45-day payment rule, which requires buyers from these firms to pay tax on delayed payments...
According to sources, the rule remained unchanged because it is tied to the Micro, Small and Medium Enterprises Development Act, which defines a delayed payment as one that has been due for 45 days or more...
Instead, they must pay tax on it and can claim a refund later upon making the payment, said a government source, adding that any change in the 45-day income tax payment provision would depend on changes to the MSME Development Act's payment timeline...
Additionally, another source noted that the impact of the move has now been absorbed by the MSME sector and their clients, with new payment cycles being made around the 45-day rule..
The new income tax provision, which came into effect on April 1 this year, had caused concerns among MSMEs, who feared that their buyers would stop giving them orders, as payments often stretch into longer time periods..
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