Sec 43b(h) msme payment

Save Share

This query is : Resolved

Quick Summary

This discussion clarifies the applicability of Section 43B(h) regarding MSME payments. The key takeaway is that Clause (h) to Section 43B is effective from 1st April 2023, meaning it doesn't apply to outstanding balances from before this date, although the obligation to pay under the MSME Act, 2006 remains. If the supplier has ceased trading and there's no future obligation, the amount might be treated as income. However, if the supplier is a trader, the Act may not apply, and there might be no outstanding issues.

uma sharma

uma sharma (Querist)

26 March 2024 I have payment due of rs 25000 since fy 2021-22, supplier is a trader of chips . Supplier fulfils criteria of msme . In this case do i need to make payment before31-3-2024.

And in case supplier has closed down business how can i make payment . To that msme if it is required to be paid

CA Ankit R Momaya

CA Ankit R Momaya (Expert)

26 March 2024 Section 43B is Applicable only w.e.f. 01/04/2023. Hence 43B cannot be trigerred for Opening Balances.

CA Kushwanth AVSR

CA Kushwanth AVSR (Expert)

26 March 2024 Clause h to the Section 43 was introduced in the Finance bill 2023 and accordingly the same will be applicable from the FY 2023-24 and hence, the same will not be applicable for the outstanding balances that prevail before 01st April 2023. However, the same does not mean that there is no obligation to pay as there is obligation to pay as per MSMED Act, 2006. However, disallowance will not be attracted.

However, if the other person had closed the business, and if there is no obligation to pay at present and in future, then it might be better to treat is as income and offer as income in the profit and loss account

Nikhil Kaushik

Nikhil Kaushik (Expert)

26 March 2024 its a strange chain of responses. Since expense pertains to a previous year, the question of disallowance does not arise anyway for the current AY.

What you need to account for is the following:

1. if the MSME has already closed down and you are sure that there is no claimant to this debt, the write back the amounts in your P&L. This would result in increase of taxable income;

2. regardless of treatment under income-tax act, the provisions of MSME act apply. So, you need to account for your liabilities under MSME Act. Specially if the owner of files complaint for recovery of dues.

RAJA P M

RAJA P M (Expert)

27 March 2024 Yes, I agreed Mr. Nikhil Kaushik sir reply. & the Supplier is a trader then the Act not applicable. So, no issues about the outstanding.

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

04 November 2026 Section 43B(h) does not apply to opening balances prior to April 1, 2023, and traders are generally excluded from these specific payment disallowance rules, meaning no immediate tax disallowance arises for the FY 2021-22 due amount.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now