Msme - 43b(h)

Micro and Small Category sector who is the business of Manufacturing and Service sectors.

If there are any specific reasons explain.

It's not related to your quest! Msme is what it is. Everything falls under msme

https://poonawallafincorp.com/blogs/msme-classification-criteria-structure-feature.php

Everything about Section 43B(h)

Section 43B(h)-Payment based deduction for amount payable to micro and small enterprise

👉Applicable from AY 2024-25 onwards
-Not Applicable for Transaction pertaining to on or before 31/03/2023

👉Due Date for Payments
-15 Days from Date of Acceptance if No Written Agreement
-45 Days from Date of Acceptance if Written Agreement is there

👉Applicable for Amount payable to micro and Small Enterprise (MSE) who are manufacturers or service providers
-Not Applicable for amount payable to medium enterprises
-Not Applicable for amount payable to unregistered MSEs
-Not Applicable for amount payable to traders because their registration on UDYAM portal is for the purpose of priority sector lending only

👉Applicable for the amount payable for Goods & Services
-Not Applicable for actionable claims and money
-Not Applicable on Interest on Loans as it is not goods nor services
-Not Applicable on Salary as it is not goods nor services
-Not Applicable on Amount Payable for Capital Goods as it was not claimed as Expense

👉Definitions
-Buyer means whoever buys any goods or receives any services from a supplier for consideration
-Supplier means a micro or small enterprise, which has filed a memorandum with the authority referred to as u/s 8(1)
-Manufacture means processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use

👉Not Applicable for Buyer filing ITR u/s 44AD/44ADA/44AE (Presumptive Taxation)
-These sections have overriding effect over section 28 to 43C, so section 43B(h) not applicable
-If buyers turnover below 10 Crore and Cash transactions is below 5% then audit u/s 44AB is not applicable but Books of Accounts are required to be maintain, in such cases section 43B(h) is Applicable

👉If Amount payable to MSE is liable to TDS and that TDS is also not paid to government then dis-allowance will be u/s 43B(h) only and not under section 40(a)(ia)

👉If Amount payable to MSE is inclusive of GST then dis-allowance will be limited to the amount exclusive of GST because GST was never claimed as expenses so it can't be dis-allowed as expenses

👉Form 3CD for FY 23-24 are yet to be notified by Income Tax Department so what to be reported in Form 3CD will be known once the notification of Form 3CD by Departments

Hello,

 

Thank you Rashmi ji for such detailed information.

 

Could you please clarify one more thing related to your point #3. I am getting mixed information on this.

 

How do we ascertain whether MSE is a manufacturer/service provider/trader? Is it solely based on the "MAJOR ACTIVITY" mentioned on their UDYAM certificate OR is it related to specific transactions between two parties?

 

If it is specific transactions then could you please help me in my case? We deal with three type of vendors.

1. Fabric suppliers - We buy fabric from them.
2. Fabricators - They stitch the fabric into finished/final products for us.
3. Direct Purchase - We do not supply any fabric to these vendors but buy finished products directly. I am not sure if these products are manufactred by them or they are just trading.

So which of these transactions fall under this MSME payment rule assuming all of them are registered MSMEs (Micro/Small)?

I'll (and more like me) be very glad for your help regarding this confusion.

Regards