Quick Summary
The Indian export sector, representing a significant portion of the nations economy, is facing a critical challenge due to a recent regulation mandating the clearance of outstanding invoices owed to micro and small enterprises within 45 days. Approximately 150,000 exporters, through various export promotion councils, are urging for exemptions from this requirement, highlighting concerns over its potential adverse impacts on cash flow and international competitiveness. Concerns Raised by E
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FAQ :
A new regulation, stemming from Section 43B(h) of the Income Tax Act, requires payments to micro and small enterprises registered under UDYAM to be cleared within 45 days.
Exporters argue that the 45-day timeframe is unrealistic given that export payments often take around 120 days. They are concerned about the impact on their cash flow and international competitiveness.
The primary concerns are the adverse impact on exporters' liquidity and cash flow, and the potential loss of international competitiveness, especially when compared to countries with more lenient payment terms.
Exporters are requesting an extension of the payment period to 120 days and temporary exemptions for export transactions involving micro and small units.
While intended to protect MSMEs from delayed payments, there are concerns that the rule could lead to some MSMEs losing business or even considering forsaking their registration due to potential difficulties in compliance for exporters.
Yes, for example, the handicrafts sector faces challenges as payment realisation can take up to 120 days due to shipment timelines, making the 45-day rule impractical.
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