MSME 45 Days payment rule: FinMin looking for possible change:

MSME 45 Days payment rule: FinMin looking for possible change A proposal to modify the new income tax law, which mandates that commercial entities pay micro, small, and medium-sized companies (MSMEs) within 45 days, is being investigated by the finance ministry. While some companies have asked for an extension of the 45-day deadline, others have asked for the provision to be postponed for a whole fiscal year. Format for Seeking confirmation of MSME Registration for applicability of Section 43B(h) According to two people with knowledge of the issue, "the department of revenue is reviewing the proposal to assess if there is any change possible." The new law is scheduled to take effect on April 1, 2024, but numerous businesses have requested a one-year extension, bringing it forward to April 1, 2025. Late Payment to MSME: Decoding Section 43B(h) of Income Tax There are several things to be concerned about. A portion of MSMEs, including those in the textile sector, are concerned that this new regulation may have an effect on their relationships with suppliers and customers, who frequently provide credit to these tiny companies. Some are concerned that this offer will not work with their current systems. The Finance Act 2023 added a new clause (h) to section 43B of the Income Tax Act to encourage timely payments to micro and small businesses. This clause states that any amount that the assessee owes to a micro or small business after the 45-day deadline set forth in section 15 of the MSME Development Act 2006 may only be deducted upon actual payment. If the payment is not made within the allotted time, the buyer will be responsible for paying tax on it. The Confederation of All India Traders recently wrote to Nirmala Sitharaman, the minister of finance, requesting a halt to the execution of the clause until enough clarity and national information dissemination are accomplished. In order to give traders a one-year grace period, CAIT also urged the government to delay the implementation of this law from April 1, 2024, to April 1, 2025. It had stated that "this will negatively affect the business of micro and small enterprise as the industry will prefer to work with medium enterprise." Source