Quick Summary
In a significant move aimed at bolstering the financial health of micro, small, and medium enterprises (MSMEs) in India, the government has announced the implementation of a stringent rule requiring payments to MSMEs to be settled within 45 days. Failure to comply with this regulation will result in companies facing tax penalties on the outstanding amount due. According to two senior finance ministry officials, any potential alteration to this rule can only occur during the Union Budget in Ju
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FAQ :
The new rule requiring payments to MSMEs to be settled within 45 days comes into effect from April 1, 2024.
Companies must make payments to their MSME suppliers within 45 days of the due date.
Failure to adhere to the 45-day payment timeline will result in companies being ineligible to claim tax deductions on the outstanding amount, making it subject to taxation.
According to finance ministry officials, any potential alteration to this rule can only occur during the Union Budget in July, as it requires parliamentary scrutiny and approval.
The rule aims to ensure prompt tax compliance, maintain uninterrupted cash flow for MSMEs, and bolster their economic sustainability.
TReDS is a government-implemented measure that facilitates prompt receivables for MSMEs by enabling the discounting of their invoices, helping them access timely funds.
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