A new government rule requires payments to Micro, Small, and Medium Enterprises (MSMEs) to be settled within 45 days of delivery, with all outstanding dues cleared by March 31, 2024. Failure to comply means pending payments are taxed as income. While intended to support MSMEs, the rule has led to significant market disruption, particularly in Ahmedabad's textile sector, with many buyers cancelling orders or delaying purchases. Industries accustomed to longer credit periods, like textiles (up to 120 days), are struggling to adapt, leading to widespread cancellations and calls for clearer guidelines.
In a significant development for the assessment year 2024-25, the central government has implemented a new rule requiring buyers to settle payments for goods purchased from Micro, Small, and Medium Enterprises (MSMEs) within 45 days of delivery. Additionally, all outstanding dues to MSMEs must be cl
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FAQ :
Buyers must now settle payments for goods from MSMEs within 45 days of delivery, and all outstanding dues must be cleared by March 31, 2024. Non-compliance will result in pending payments being taxed as income.
The new 45-day payment deadline is difficult for many businesses, especially those in sectors like textiles that traditionally operate on much longer credit periods (up to 120 days). This has led to a surge in order cancellations.
The textile industry, with its typical credit period of up to 120 days, is significantly affected. The chemical industry, usually offering around 60 days credit which is often extended, is also experiencing ripple effects.
Some buyers are cancelling existing orders and delaying new purchases from MSME manufacturers until after February 16 to ensure payment deadlines fall into the next financial year. Buyers are also checking the MSME registration status of sellers.
The government's intention is to safeguard the interests of MSMEs by ensuring timely payments.