Key Points
They are coming to grips with a situation where profits will be dented by a new law to be triggered on March 31: businesses will be hit by a higher tax outgo if they fail to clear dues, outstanding for over 45 days, to small and micro vendors who are often at the receiving end of typically long and tiring credit cycles...
Thus, under the law, if a business entity --- be it a company, proprietorship, partnership firm, or LLP --- fails to make payment to any of its supplier registered as `micro or small enterprise, it would not get the deduction of its purchase in the year of the purchase but can claim the deduction only in the year of actual payment..
Now, under the laws (MSME Act and section 43B(h) of the Income Tax Act), the time limit for payment to `micro and small enterprises is 15 days or a maximum of 45 days if there is a written agreement between the buyer and the seller...
Several other laws have also outlined provisions for the timely payment of dues to micro, small, and medium enterprises (MSMEs)...
On one hand, they may lose the ability to claim expenditures if payments are not made promptly, and on the other hand, they may struggle to receive payments if the counterparty, whether an MSME or not, fails to make timely payments..
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