MSME news update:
The Federation of All India Vyapar Mandal (FAIVM) will urge the new NDA government to extend the payment period for MSMEs from their buyers to 180 days, up from the current 45 days. Speaking to FE Aspire, FAIVM President Jayendra Tanna mentioned that the modifications to Section 43B of the Income Tax Act concerning delayed payments for MICRO, SMALL & MEDIUM ENTERPRISES, are likely to be repealed in the full budget in July, as hinted by Finance Minister Nirmala Sitharaman during the Narendra Modi-led government’s second term.
“The new government should implement a uniform policy requiring payments to suppliers of goods and services within 180 days from the invoice date instead of the current 45 days,” said Tanna. Currently, traders, including wholesale and retail traders, face limitations in raising bank credit under priority sector lending norms, and there is no mandate for their buyers to pay them within 45 days to qualify for tax benefits. As a result, Tanna suggested that the new government should extend the benefits of MSME registration, including the delayed payment mandate, to traders with Udyam registration from the MICRO, SMALL & MEDIUM ENTERPRISES, Ministry.
“The revised payment policy will also address the provisions of GST (Goods and Services Tax) regulations,” Tanna added.
In May, while speaking to MSMEs and local industries in Ludhiana, Sitharaman had indicated that the government would repeal the changes made to Section 43B of the Income Tax Act in the full budget if MSMEs prefer operating without fixed payment timelines from their buyers.
“If MSMEs desire relaxation from the 45-day payment limit, whether it extends to 150 days or a year, we will revert to the original rule,” Sitharaman had stated. On May 6, the Supreme Court had rejected a plea by FAIVM, the Madras Merchants and Manufacturers Association, and the Confederation of West Bengal Trade Associations seeking an interim stay or quashing of the new provision in the Income Tax Act.
On April 1, 2024, the government introduced a new clause (h) requiring expenses to MSME buyers to be paid within 45 days in the year of payment instead of the year incurred.
