Finance Ministry Mulls Delaying 45-Day Payment Rule For MSMEs
The Union Finance Ministry is reportedly considering a deferment of the enforcement of Rule 43B (h) under the Income Tax Act, which mandates payments to micro, small, and medium enterprises (MSMEs) within 45 days, according to media reports.
Reports indicate that the proposed postponement is likely to extend for an entire financial year, with the rule expected to come into effect from 1 April 2025.
The amendment to the Income Tax Act was introduced through the Finance Act of 2023, incorporating clause (h) in Section 43B with the aim of ensuring timely payments to MSMEs. This amendment imposed a 45-day deadline for the assessee to fulfill payments. Failure to comply with this timeline would result in pending payments being treated as income and subjected to taxation.
The decision to reconsider the implementation timeline follows numerous representations from various industries submitted to the finance ministry. These representations voiced concerns about the shorter payment cycle, arguing that it disrupts traditional practices and has already resulted in order cancellations.
Industry bodies, in their proposals to the finance ministry, have suggested potential modifications to the act or a temporary postponement to allow businesses time to adjust.
It has been reported that the Ministry of MSME reached out to several SME groups on 16 February to gather feedback on this matter. The SME groups were requested to submit their comments by 19 February, as per sources familiar with the discussions.