Quick Summary
The Finance Ministry is deliberating over potential adjustments to a newly proposed income tax rule requiring business enterprises to settle payments to micro, small, and medium enterprises (MSMEs) within 45 days. This consideration follows appeals from various sectors of the business community, wit
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FAQ :
The new rule, introduced by the Finance Act 2023, states that payments to MSMEs beyond the 45-day limit specified in the MSME Development Act 2006 will only be deductible for tax purposes upon actual payment. Buyers failing to meet the deadline will be taxed on outstanding amounts.
The Ministry is considering adjustments due to appeals from various sectors of the business community, who have raised concerns about the rule's potential impact on their operations and credit relationships.
Some businesses are requesting a deferment of the provision by a full financial year (to April 1, 2025), while others are asking for an extension of the 45-day timeframe.
Concerns include the potential disruption of existing credit-based relationships between MSMEs, suppliers, and buyers, and reservations about businesses' preparedness to comply with the stipulated 45-day timeframe.
The new rule was slated to take effect from April 1, 2024.
The Confederation of All India Traders (CAIT) has petitioned the Finance Minister for a suspension of the rule's implementation until comprehensive clarification is achieved nationwide.
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