MSME & Income Tax

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This discussion clarifies payment obligations for businesses to their MSME-registered vendors. Even if your proprietary concern isn't registered under MSME and has a turnover below the tax audit threshold, you are generally liable to pay MSME vendors within 45 days. However, if you opt for presumptive taxation under Section 44AD, the disallowance under Section 43B(h) may not apply. This rule applies regardless of your business structure (company, LLP, firm, proprietary) as long as the vendor is a micro or small manufacturer or service provider.

Piyush

Piyush (Querist)

26 March 2024 A Proprietory concern registered under GST,
but Not registered under MSME, also having turnover below tax Audit limit

If its Vendor are registered under MSME

Is Proprietary concern liable to clear its dues to their vender (regd in MSME) within 45 days ?

CA Kushwanth AVSR

CA Kushwanth AVSR (Expert)

26 March 2024 Yes it is. However, if the turnover is below the tax audit limit and if the vendor had opted for presumptive taxation u/s 44AD, then the the disallowance u/s 43B(h) will not be applicable as the section 44AD starts with "Notwithstanding anything contrary contained in section 28 to 43C".
However, section 43B(h) disallowance is not applicable to the vendors who are registered themselves as traders under MSME.

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Piyush

Piyush (Querist)

26 March 2024 So any Buyer (Whether company/LLP/Firm/Proprietary) not registered under MSME and not opted for presumptive taxation has to pay within 45 days to its MSME registered vendors even if exempted from Tax Audit?

CA Kushwanth AVSR

CA Kushwanth AVSR (Expert)

26 March 2024 Exactly, because unlike some of the TDS provisions, this is entirely different because, it is nowhere specified that it is applicable only to those who are liable to get audited u/s 44AB. hence, it is applicable, however the vendor needs to be either Micro or small and need to be either manufacturer or service provider and our registration under MSME is irrelevant.

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