Starting April 1, the Income Tax Act’s Section 43B(h) will enforce stricter regulations on businesses, disallowing tax deductions for payments delayed beyond 45 days to Micro, Small, and Medium Enterprises (MSMEs) for goods and services supplied. Introduced through the Finance Act 2023, this provision aims to ensure timely payments to MSMEs and prevent larger companies from withholding payments, potentially resulting in higher taxes for the defaulting entities.
While some industry bodies have called for a postponement of the rule’s implementation, the Federation of Indian Micro and Small & Medium Enterprises (FISME) views it as a potential game-changer for MSMEs. Despite concerns that large buyers might prefer non-MSME suppliers to avoid compliance, FISME dismisses such fears, stating that the provision instills discipline in commercial practices and benefits MSMEs in the long run.
FISME emphasizes that timely payments are crucial for the financial health and growth of MSMEs. The provision also strengthens MSMEs’ negotiation power with larger companies, minimizes disputes over outstanding dues, and promotes transparent business practices in the MSME ecosystem.
While the Confederation of All India Traders (CAIT) welcomed the government’s decision to prioritize timely payments to MSMEs, it urged for clarity on the law’s applicability to traders and requested a one-year deferment of its implementation until sufficient clarification is provided and understood nationwide.
