The revised Section 43B of the Income-tax Act, 1961, introduced in the Union Budget last year, has been widely endorsed by MSME associations across India, said Pankaj Chaudhary, Minister of State for Finance, in the Lok Sabha on Monday. The revision aims to address the chronic issue of delayed payments faced by micro and small enterprises (MSEs), which often jeopardize their cash flow and business sustainability.
Pankaj Chaudhary highlighted that Clause (h) was added to Section 43B in April 2023. This clause mandates that any payment overdue by more than 45 days to MSEs will only be tax-deductible upon actual payment. This provision incentivizes prompt payments by buyers and helps reduce financial strain on small businesses.
In addition, companies sourcing goods or services from MSEs and delaying payments beyond 45 days are now required to submit half-yearly returns to the Ministry of Corporate Affairs, detailing the dues and reasons for delays.
The government has also extended mandatory onboarding to the TReDS platform, operated by the Reserve Bank of India (RBI), for businesses with a turnover exceeding ₹250 crore (down from ₹500 crore) and all Central Public Sector Enterprises (CPSEs). TReDS facilitates the discounting of trade receivables, offering MSEs quicker access to funds through multiple financiers.
The Micro and Small Enterprises Facilitation Councils (MSEFCs), established under the MSMED Act, 2006, are another crucial mechanism addressing delayed payment grievances. To date, 159 MSEFCs have been set up across states, with multiple councils operational in regions like Maharashtra, Tamil Nadu, and Uttar Pradesh.
According to the Samadhaan portal, which tracks delayed payment cases, 43,069 applications involving ₹7,085 crore have been resolved out of 2.13 lakh cases, involving a total of ₹47,366 crore.
These efforts underscore the government’s commitment to ensuring the financial stability of MSMEs, a sector critical to India’s economic growth. Industry experts believe that these measures, if implemented effectively, will foster a healthier business ecosystem and improve compliance among large companies.
This legislative push highlights the government’s proactive stance on protecting MSEs and ensuring a more inclusive economic environment.
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