MSME Reporting in Tax Audit Report with Example:

MSME Reporting in Tax Audit Report with Example This year there is a big change in MSME reporting in Tax Audit Report. The New clauses added for MSME reporting are: Clause 22 (i) Amount of interest inadmissible under section 23 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act); or 22 (ii) Total amount required to be paid to a micro or small enterprise, as referred to in section 15 of the MSMED Act, during the previous year; 22 (iii) Of amount referred to in (ii) above, amount — (a) paid up to time given under section 15 of the MSMED Act; (b) not paid up to time given under section 15 of the MSMED Act and inadmissible for the previous year. Let us understand with an example how MSME Reporting will be more challanging this year:

Particulars		Amount (Rs.)
Total Purchases from micro or small enterprise		10,00,000.00
Paid within MSME Timelines
Paid in FY 2024-25 upto 31st March 2025		7,50,000.00
Paid in FY 2024-25 after 31st March 2025		1,00,000.00
Paid beyond MSME Timelines
Paid in FY 2024-25 upto 31st March 2025		50,000.00
Paid in FY 2024-25 after 31st March 2025		1,00,000.00
Expense of FY 2023-24 paid after 31st March 2024 beyond MSME Timeline		30,000.00
Interest paid under MSME Law for Late Payment		15,000.00

Now let us see how this will be reported in TAR:

Particulars	Reported in TAR	Expense Disallowed in ITR
22 (i) Amount of interest inadmissible under section 23 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act); or	15000	Disallowed
22 (ii) Total amount required to be paid to a micro or small enterprise, as referred to in section 15 of the MSMED Act, during the previous year;	1000000
22 (iii) Of amount referred to in (ii) above, amount —
(a) paid up to time given under section 15 of the MSMED Act;	850000	As per my understanding the amount of Rs. 900000 should be allowed as an expense.
(b) not paid up to time given under section 15 of the MSMED Act and inadmissible for the previous year.	100000	Disallowed

Amount of Rs. 100000 which is disallowed in FY 2024-25 will be allowed in FY 2025-26.

26. In respect of any sum referred to in section  43B, the liability for which:
(A) pre-existed on the first day of the previous year but was not  allowable in the assessment of any preceding previous year and was
(a) paid during the previous year;	30000
(b) not paid during the previous year;	0

Amount of Rs. 30000 which was disallowed in FY 2023-24 will now be allowed in FY 2024-25.