In the Union Budget 2024-25, Finance Minister Smt. Nirmala Sitharaman has addressed the central government’s controversial 45-day payment rule by announcing a new fund in collaboration with banks to support India's cash-strapped micro, small, and medium enterprises (MSMEs). This initiative aims to alleviate the financial strain caused by delayed payments.
Key Points
- Introduction of New Fund for MSMEs: The newly established fund, in partnership with banks, is designed to ensure that MSME units receive timely support in case of financial strain resulting from delayed payments.
- 45-Day Payment Rule: Under the new clause in Section 43B(h) of the Income Tax Act 1961, traders are mandated to settle bills with MSME units within 45 days of purchase to avoid forfeiture of certain deductions. This rule, effective since April 1, 2024, has sparked concerns among MSME associations regarding potential contract cancellations and additional tax burdens on suppliers.
- Budget Initiatives for MSMEs: While the budget introduced various initiatives to support Indian MSMEs, it notably did not address the highly anticipated review of the newly implemented 45-day payment rule. Despite the concerns raised, the government has left the 45-day payment deadline unchanged.
- Anusandhan National Research Fund: To foster innovation and research and development (R&D), the Finance Minister announced the establishment of the Anusandhan National Research Fund, amounting to Rs 1 lakh crore. This fund aims to bolster private sector-driven research and innovation, with a particular emphasis on sectors like agriculture.
- Role of Bengaluru in Digital Public Infrastructure: Bengaluru’s pivotal role in the expansion of digital public infrastructure (DPI) was highlighted, with a focus on making digital payments a commonplace occurrence across various sectors.
Analysis
The new fund introduced in the Union Budget 2024-25 is a significant step towards supporting MSMEs facing financial difficulties due to the 45-day payment rule. However, the government's decision to maintain the rule without revision has left many MSME associations concerned about its long-term implications. Additionally, the emphasis on innovation and digital infrastructure highlights the government's commitment to fostering growth and development in key sectors.
Conclusion
The Union Budget 2024-25 brings mixed feelings for MSMEs. While the introduction of a new fund provides a safety net for financial strain, the unchanged 45-day payment rule continues to pose challenges. The focus on research, innovation, and digital infrastructure is a promising move towards a more resilient and advanced economy.
CAclubindia
